Answer REQUIREMENT 4

Federal Bank has $200,000 of 5% debenture bonds outstanding. The bonds were issued at 104 in 2018 and mature in 2038 . The bonds have annual interest pavments Read the requirements Requirement 1. How much cash did Federal Bank receive when it issued these bonds? Federal Bank received $ Requirement 2. How much cash in total will Federal Bank pay the bondholders through the maturity date of the bonds? Federal Bank will pay the bondholders $ Requirement 3. Calculate the difference between your answers to requirements 1 and 2. This difference represents Federal Bank's total interest expense 208,000 at bond issuance 400,000 through the maturity date of the bonds over the life of the bonds The difference between your answers to requirements 1 and 2 is $ 192,000 Requirement 4. Compute Federal Bank's annual interest expense using the straight-line amortization method. Multiply this amount by 20. Your 20-year total should be the same as vour answer to requirement 3 Federal Bank's annual interest expense using the straight-line amortization method is $ 9500 i Requirements 1. 2. How much cash did Federal Bank receive when it issued these bonds? How much cash in total will Federal Bank pay the bondholders through the maturity date of the bonds? Calculate the difference between your answers to requirements 1 and 2. This difference represents Federal Bank's total interest expense over the life of the bonds 3. 4. Compute Federal Bank's annual interest expense using the straight-line amortization method. Multiply this amount by 20. Your 20-year total should be the same as your answer to requirement 3 Print Done