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How much interest expense will the company recognize

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1. A manufacturing company borrowed $800 using a 6-year zero-coupon bond. At maturity, the firm will owe $914. How much interest expense will the company recognize over the term of the bond?

2. A software company issued a $750 fixed-coupon 4-year 3% bond at par two years ago. The bond pays interest annually. Suppose the company repurchased the bond for $745.98 right after the 2nd interest payment. What is the effect of the repurchase on the firm's pre-tax income (i.e., net income ignoring taxes)?

Reference no: EM133116557

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