Question

ASSIGNMENT 12.2.

PREPARING A-LEVEL DEBT SERVICE BOND PAYMENT SCHEDULE: The City General Hospital has to issue a bond to finance its upgrading of its emergency department. The bond issuance is $100 million for twenty years bearing an interest rate of 8 percent, paid semi-annually. Prepare the payment schedule based on a level debt-service bond.

Answer 1

Bond Issue = PV = $100 million

r = semi annual interest rate = 8%/2 = 4%

n = 20*2 = 40

Semi annual payment = [r*PV] / [1 - (1+r)^-n]

= [4%*$100 million] / [1 - (1+4%)^-40]

= $4 million / 0.791710955

= $5.05234892 million

= $5,052,348.94

Therefore, Semi annual bond payment = $5,052,348.94

Debt Service Repayment Schedule of Bond
Period	Opening Balance	Bond Payment	Interest payment	Principal repayment	Closing Balance
A	B	C	D = B*4%	E = C-D	F = B-E
1	100000000	5052348.94	4000000	1052348.935	98947651.07
2	98947651	5052348.94	3957906.043	1094442.892	97853208.17
3	97853208	5052348.94	3914128.327	1138220.608	96714987.56
4	96714988	5052348.94	3868599.503	1183749.432	95531238.13
5	95531238	5052348.94	3821249.525	1231099.41	94300138.72
6	94300139	5052348.94	3772005.549	1280343.386	93019795.34
7	93019795	5052348.94	3720791.813	1331557.122	91688238.21
8	91688238	5052348.94	3667529.529	1384819.406	90303418.81
9	90303419	5052348.94	3612136.752	1440212.183	88863206.63
10	88863207	5052348.94	3554528.265	1497820.67	87365385.96
11	87365386	5052348.94	3494615.438	1557733.497	85807652.46
12	85807652	5052348.94	3432306.098	1620042.837	84187609.62
13	84187610	5052348.94	3367504.385	1684844.55	82502765.07
14	82502765	5052348.94	3300110.603	1752238.332	80750526.74
15	80750527	5052348.94	3230021.07	1822327.865	78928198.87
16	78928199	5052348.94	3157127.955	1895220.98	77032977.89
17	77032978	5052348.94	3081319.116	1971029.819	75061948.08
18	75061948	5052348.94	3002477.923	2049871.012	73012077.06
19	73012077	5052348.94	2920483.083	2131865.852	70880211.21
20	70880211	5052348.94	2835208.448	2217140.487	68663070.72
21	68663071	5052348.94	2746522.829	2305826.106	66357244.62
22	66357245	5052348.94	2654289.785	2398059.15	63959185.47
23	63959185	5052348.94	2558367.419	2493981.516	61465203.95
24	61465204	5052348.94	2458608.158	2593740.777	58871463.17
25	58871463	5052348.94	2354858.527	2697490.408	56173972.77
26	56173973	5052348.94	2246958.911	2805390.024	53368582.74
27	53368583	5052348.94	2134743.31	2917605.625	50450977.12
28	50450977	5052348.94	2018039.085	3034309.85	47416667.27
29	47416667	5052348.94	1896666.691	3155682.244	44260985.02
30	44260985	5052348.94	1770439.401	3281909.534	40979075.49
31	40979075	5052348.94	1639163.02	3413185.915	37565889.57
32	37565890	5052348.94	1502635.583	3549713.352	34016176.22
33	34016176	5052348.94	1360647.049	3691701.886	30324474.33
34	30324474	5052348.94	1212978.973	3839369.962	26485104.37
35	26485104	5052348.94	1059404.175	3992944.76	22492159.61
36	22492160	5052348.94	899686.3845	4152662.55	18339497.06
37	18339497	5052348.94	733579.8825	4318769.052	14020728.01
38	14020728	5052348.94	560829.1204	4491519.815	9529208.196
39	9529208.2	5052348.94	381168.3278	4671180.607	4858027.588
40	4858027.6	5052348.94	194321.10	4858027.831	0