On january 1 year 6 the corporation issued 1000000 face

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Reference no: EM13601689

On January 1, Year 6, The Corporation issued $1,000,000 face value, 20-year bonds. The bonds carry coupon interest of 6 percent per year, payable semiannually on June 30 and December 31. The bonds were initially priced on the market to yield 8 percent, compounded semiannually.

The present value of a single amount for 3% 40 periods is .30656
The present value of a single amount for 4% 40 periods is .20829
The present value of an annuity for 3% 40 periods is 23.11477
The present value of an annuity for 4% 40 periods is 19.79277

Required:

a - Compute the issue price of these bonds on January 1, Year 6.

b - Compute the amount of interest expense on these bonds for Year 6 assuming that the firm uses the effective-interest method of amortizing bond premium or discount.

Reference no: EM13601689

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