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    Bond and Interest Payments

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    A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 10%. How do I calculate the first semi-annual interest payment and the amortization of any bond discount or premium?

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    Solution Preview

    First calculate the issue price of the bonds. The issue price is the present value of interest and principal discounted at the market rate of 10%. The semi annual interest is 500,000 X 9%/2 = 22,500. Time period is 10 X 2 = 20 semi annual and the discounting ...

    Solution Summary

    The solution explains how to calculate interest payments and premium amortization using both effective interest rate and straight line method