0 Required information The following information applies to the questions displa

Question

0 Required information The following information applies to the questions displayed belowj Legacy issues $610,000 of 65%, four-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $579,203 and their market rate is 8% at the issue date 2. Determine the total bond interest expense to be recognized over the bonds' life. Total bond interest expense over life of bonds Amount repaid payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense

Explanation / Answer

Explanations:

Total coupon payments = 2*4 = 8

Value of each semiannual coupon payment = 6.5%/2*610,000 = 19,825

Thus total coupon payments = 8*19,825 = $158,600

Amount repaid: 8 payments of $19,825 158,600.00 Par value at maturity 610,000.00 Total repaid 768,600.00 less: amount borrowed 579,203.00 Total bond interest expense 189,397.00

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