Answered

At Westonci.ca, we make it easy to get the answers you need from a community of informed and experienced contributors. Explore a wealth of knowledge from professionals across different disciplines on our comprehensive platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

On January 1 of this year, Houston Company issued a bond with a face value of $18,000 and a coupon rate of 6 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 5 percent. Houston uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answers to whole dollars.) Required: 1. Complete a bond amortization schedule for all three years of the bond's life. (Enter all values as positive values.)

Sagot :

anthougo

Answer:

Houston Company

The Bonds Amortization Schedule

Period PV                           PMT         Interest         FV

1          $18,490.18         $1,080.00         $924.51         $18,334.69

2         $18,334.69        $1,080.00         $916.73         $18,171.43

3         $18,171.43          $1,080.00         $908.57         $18,000.00

Explanation:

a) Data and Calculations:

Face value of bond = $18,000

Coupon rate = 6%

Annual coupon payment = $1,080 ($18,000 * 6%)

From an online financial calculator, the PV of the bond = $18,490.18:

N (# of periods)  3

I/Y (Interest per year)  5

PMT (Periodic Payment) = $1,080

FV (Future Value)  = $18,000

Results

PV = $18,490.18

Sum of all periodic payments = $3,240.00

Total Interest = $2,749.82

We hope this was helpful. Please come back whenever you need more information or answers to your queries. Thank you for choosing our platform. We're dedicated to providing the best answers for all your questions. Visit us again. Thank you for trusting Westonci.ca. Don't forget to revisit us for more accurate and insightful answers.