Question

Teal Mountain Inc. has issued three types of debt on January 1, 2020, the start of the company’s fiscal year:

1.		$10 million, 10-year, 12% unsecured bonds, with interest payable quarterly, priced to yield 11%
2.		$2 million par of 12-year, zero-coupon bonds at a price to yield 11% per year
3.		$14 million, 12-year, 9% mortgage bonds, with interest payable annually to yield 11%

Prepare a schedule that identifies the following items for each bond:

				Unsecured Bonds			Zero- Coupon Bonds			Mortgage Bonds
(a)		Maturity value		$			$			$
(b)		Number of interest periods over the life of the bond
(c)		Stated rate for each interest period			%			%			%
(d)		Effective interest rate for each interest period			%			%			%
(e)		Payment amount per period		$						$
(f)		Present value of the bonds at the date of issue

Answer 1