Computation finance, valuation, bonds

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Reference no: EM1316901

Computation finance, valuation, Bonds and Annuity new carrying value for the bond

Bond Problem:

On January 1, 2008, the Junco Company issued $500,000 face amount 10 year, 10% stated rate bond when the market interest rates were 11%. The bonds pay interest semiannually each June 30th and December 31st and mature on December 31, 2018.

Required:

a. What is the effective interest rate?

b. Using the present value tables contained on the following pages, calculate the proceeds (issue price) of the Junco Company\'s bonds on January 1, 2008 assuming that the bonds were sold to provide a market rate of return to the investor.

c. What will be the cash interest payment made on June 30th, 2008

d. Using the effect interest rate method, determine the interest that will be recognized on the income statement on June 30th, 2008.

e. What will be the new carrying value for the bond on June 30th, 2008?

Reference no: EM1316901

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