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Calculate the bond discount at issuance- Luba Corporation

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On January 1, 2005, when the market interest rate was 14%, Luba Corporation issued bonds in the face amount of $500,000, with interest at 12% payable semiannually. The bonds mature on December 31, 2014.

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Calculate the bond discount at issuance. How much of the discount should be amortized by the effective interest method on July 1, 2005?

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FV = 500,000
N = 10*2 = 20
payment each period = 500,000 * 12%/2 = 30,000
yield rate = 14%/2 = 7%
Then using a financial calculator, or EXCEL ...

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