$400,000 of 9%, five-year bonds (semi-annual interest payments) sold to yield 10% at January 1, 2001.
Selling price is calculated as follows:
|
|
Present value of $400,000 in 5 years
|
$400,000
|
0.61391
|
$245,564.00
|
|
|
Present value of interest payments
|
$18,000
|
7.72173
|
$138,991.14
$384,555.14
|
|
|
Date
|
Cash
payment
|
Interest expense
|
Discount amortization
|
Carrying value of bonds
|
|
January 1, ’01
|
—
|
—
|
—
|
$384,555.14
|
|
July 1, ’01
|
$18,000.00
|
$19,227.76
|
$1,227.76
|
$385,782.90
|
|
January 1, ’02
|
$18,000.00
|
$19,289.14
|
$1,289.14
|
$387,072.04
|
|
July 1, ’02
|
$18,000.00
|
$19,353.60
|
$1,353.60
|
$388,425.64
|
|
January 1, ’03
|
$18,000.00
|
$19,421.28
|
$1,421.28
|
$389,846.93
|
|
July 1, ’03
|
$18,000.00
|
$19,492.35
|
$1,492.35
|
$391,339.27
|
|
January 1, ’04
|
$18,000.00
|
$19,566.96
|
$1,566.96
|
$392,906.24
|
|
July 1, ’04
|
$18,000.00
|
$19,645.31
|
$1,645.31
|
$394,551.55
|
|
January 1, ’05
|
$18,000.00
|
$19,727.58
|
$1,727.58
|
$396,279.13
|
|
July 1, ’05
|
$18,000.00
|
$19,813.96
|
$1,813.96
|
$398,093.08
|
|
January 1, ’06
|
$18,000.00
|
$19,906.92*
|
$1,906.92
|
$400,000.00
|
|
*$2.27 rounding error
|
|