1. Arrango borrows from the general public by issuingone thousand 3-year 10% bonds on January 1, 2013 at par (i.e.,issues the bonds at face value). Each bond has a $1,000 face value and pays semi-annual interest on June 30 and December 31 of each year. The bonds are traditional in the sense that the entire principal repayment occurs at the maturity date of the bond issue.
a. What are the proceeds from the bond issue if investors require an8% return on investment?
b. Prepare an amortization schedule for the bond issue using the effective interest method.
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Date
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IntPymt
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IntExp
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Premium
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Carrying Value
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Beg Bal
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6/30/2013
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12/31/2013
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6/30/2014
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12/31/2014
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6/30/2015
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12/31/2015
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c. Make the JE for the June 30, 2013 interest payment.