Compute the proceeds on issue of the bond

Reference no: EM132844502

Problem - Baba limited offered a sh 25m, 8%, 5 year bond to finance its growth. The bond was offered at a discount of 10% and the total legal and other costs amounted to sh 1.5 million. Interest is payable annually in arrears and the bond is redeemable at the end of the 5 years at a premium of 2%.

Required -

(i) Compute the proceeds on issue of the bond.

(ii) Compute the effective rate of interest.

(iii) Prepare the amortization schedule of the bond.

Reference no: EM132844502

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