I purchased a $25,000 bond @ 104 as a long term investment on January 1, 2007. The bond pays interest annually on each Dec 31 and matures Dec 31, 2009. Assuming a straight line amortization, what is net amount of cash received from this investment over its life? How much cash is collected each year? How much premium will be amortized each year?
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I purchased a $25,000 bond @ 104 as a long term investment on January 1, 2007. The bond pays interest annually on each Dec 31 and matures Dec 31, 2009. Assuming a straight line amortization, what is net amount of cash received from this investment over its life? How much cash is collected each year? How much premium will be amortized each year?
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Computations shown "long hand" for each question.
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Straight-Line Amortization of Bond Premium
Assuming the par value of the bond is $100, and 25000 shares are purchased.
Then the premium that is paid ...
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