On January 1, 2015, Vacation Destinations issues $40 million of bonds that pay i

Question

On January 1, 2015, Vacation Destinations issues $40 million of bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:

Were the bonds issued at face amount, a discount, or a premium?

what is the original issue price of the bonds?

what is the face amount of the bonds?

what is the stated annual interest rate?

what is the market annual interest rate?

what is the total cash interest paid over the term to maturity if the term of the bond is 10 years?

On January 1, 2015, Vacation Destinations issues $40 million of bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:

(1) (2) (3) (4) (5) Date Cash Paid
for Interest Interest
Expense Increase in
Carrying Value Carrying
Value 1/1/2015     $37,281,935 6/30/2015     $1,400,000 $1,491,277     $91,277       37,373,212 12/31/2015     1,400,000 1,494,928     94,928       37,468,140

Explanation / Answer

Vacatoion Destination Details Amt $                    1 The bond was issued at a price lower than the face value so the bond was issued at discount.                    2 Original Issue Price of Bond =          37,281,935                    3 The face value of the Bond is =          40,000,000                    4 Half Yearly inteerst paid =             1,400,000 Yearly Interest amount=             2,800,000 Stated Interest rate=2800000/40000000= 7.00%                    5 Market Half yearly rate=1491277/37281935= 4.00% Market Yearly Interest Rate= 8.00%                    6 Cash Ineterst Paid per 6 months             1,400,000 Bond term=10 years =20 half years Total Cash Inteerst Payable =1400000*20=          28,000,000

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