Brief Exercise 9-3 Calculate the issue price of bonds (L09-5) Uit nate Butter Po

Question

Brief Exercise 9-3 Calculate the issue price of bonds (L09-5) Uit nate Butter Pop om ss es S%, 15-year bonds with a face an ount of S49,000. The market interest rate for bonds of similar risk and maturity is 5%. Interest is paid semiannually. At what price will the bonds issue? (FV Round"Market interest rate" to 1 decimal place. $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Face amount $ 49,000 Market interest rate to Issue price

Explanation / Answer

1) Ultimated - since the contract rate and market interest rate are same the bonds are said to be issued at par Bonds Characterstics amount Face amount 49,000 interest payment 1225 market interest rate 5% periods to maturity 30 issue price 49,000 2) interest expense 3289 (82,219*8%*1/2) 3) lyeles interest expense (70998*2.5%) 1775 (june 30) cash interest (77000*2%)= 1540 hence discount amortized = 1775-1540= 235 interest expense (70998+235)*2.5%= 1781 total bond interest expense to be reported 3556 answer

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