Determine the total discount or premium for issue

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The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. Each bond has $1,000 face value, and the issuing company is in the 35% tax bracket.

Bond 

Proceeds per Bond 

Size of Issue 

Initial Maturity of Bond 

Years Remaining to Maturity 

$ 975 

50,000 bonds 

10 years 

5 years 

1,020 

25,000 bonds 

20 

15 

1,000 

100,000 bonds 

25 

12 

a. Indicate whether each bond was sold at a discount, at a premium, or at its face value. 

b. Determine the total discount or premium for each issue. 

c. Determine the annual amount of discount or premium amortised for each bond. 

d. Calculate the unamortised discount or premium for each bond. 

e. Determine the after-tax cash flow associated with the retirement now of each of these bonds, using the values developed in part (d).

Reference no: EM133116697

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