Question
On January 1, 2016, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization
| On January 1, 2016, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: |
| Payment | Cash Payment | Effective Interest | Increase in Balance | Outstanding Balance |
| 7,306,018 | ||||
| 1 | 430,000 | 438,361 | 8,361 | 7,314,379 |
| 2 | 430,000 | 438,863 | 8,863 | 7,323,242 |
| 3 | 430,000 | 439,395 | 9,395 | 7,332,637 |
| 4 | 430,000 | 439,958 | 9,958 | 7,342,595 |
| 5 | 430,000 | 440,556 | 10,556 | 7,353,151 |
| 6 | 430,000 | 441,189 | 11,189 | 7,364,340 |
| ~ | ~ | ~ | ~ | ~ |
| ~ | ~ | ~ | ~ | ~ |
| ~ | ~ | ~ | ~ | ~ |
| 38 | 430,000 | 502,207 | 72,207 | 8,442,327 |
| 39 | 430,000 | 506,540 | 76,540 | 8,518,867 |
| 40 | 430,000 | 511,133 | 81,133 | 8,600,000 |
| Required: |
| 1. | What is the face amount of the bonds? |
| 2. | What is the initial selling price of the bonds? |
| 3. | What is the term to maturity in years? |
| 4. | Interest is determined by what approach? | ||||
|
| 5. | What is the stated annual interest rate? |
| 6. | What is the effective annual interest rate? |
| 7. | What is the total cash interest paid over the term to maturity? |
| 8. | What is the total effective interest expense recorded over the term to maturity? |
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Strategic Management Theory And Cases An Integrated Approach
Authors: Charles W. L. Hill, Melissa A. Schilling, Gareth R. Jones
13th Edition
0357033841, 978-0357033845
