9.Flying Things, Inc. is planning to issue bonds having a $250,000 face value, a 10% stated rate and a life of 10 years. Assume the bonds are sold to yield 8%.
Required:
a.At what price would you expect the bonds to sell? Clearly and neatly show your supporting computations.
b.Complete the first three years of the amortization table below:
YearBeginning PrincipalInterest PaidInterest ExpenseDecrease in PrincipalEnding Principal
1
2
3
c.What total amount of interest expense will be incurred on these bonds during the first three years? Describe how you obtained this amount.
10.River Rim Enterprises issued $100,000 face value, 5% coupon, 4-year bonds on January 1, 2007. The bonds were sold to yield 6% and will pay interest semi-annually.
Required:
a.Determine the selling price of the bonds. Clearly and neatly show the computations that support your answer.
b.Prepare an amortization table for the bonds for the first two periods.
c.What is the total amount of interest expense on these bonds during the first year?