Question

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:

3. The market interest rate is 4% and the bonds issue at a premium. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Round your answers to nearest whole dollar.)

Answer 1

a.	Issue price of bond	=	=-pv(rate,nper,pmt,fv)			Where,
		=	$ 16,22,635.75			rate	2%
						nper	20
						pmt	$             37,500
						fv	$       15,00,000
b.	Amortization Schedule:
	Semi annual period ending on	Interest expense	Coupon paid in cash	Premium amortization	Unamortized Premium	Carrying value of bond
	January 1				$ 1,22,635.75	$ 16,22,635.75
	June 30	$           32,452.72	$        37,500.00	$ 5,047.28	$ 1,17,588.47	$ 16,17,588.47
	December 31	$           32,351.77	$        37,500.00	$ 5,148.23	$ 1,12,440.23	$ 16,12,440.23