If the beginning balance of the bond (issued at a discount) is $885.30, the cash payment is $50 (coupon rate is 5%, face value of bond is $1,000), and the annual market interest rate for the period is 6%, what is the amount of amortization and the ending balance of the bond?
Beginning balance of bond = $885.30
cash payment for interest = $50
Par value of bond = $1,000
Market interest rate = 6%
Interest expense = Beginning balance of bond x Market interest rate
= 885.30 x 6%
= $53.12
Amortization amount = Interest expense - cash payment for interest
= 53.12 - 50
= $3.12
Ending balance of bond = Beginning balance of bond + Amortization amount
= 855.30 + 3.12
= $888.42
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