On January 1, 2020 a corporation issued $600,000 face value

of bonds due in 10 years with a contractual interest rate of 7%.

Interest is payable each July 1 and January 1.

The bonds are priced to yield 8%.

(1) What is the formula for calculating interest?

HINT: The same formula is used to calculate Interest Paid and Interest Expense,

although the numbers needed are different numbers.

(2) How much interest is required to be paid by the bond contract every 6 months?

(3) What is the Present Value of the bonds?

(4) (a) How much Interest Expense must be recorded on January 1, 2020?

HINT: This question is a little tricky.

(b) How much Interest Paid must be recorded on January 1, 2020?

HINT: This question is a little tricky.

(5) How much Interest Expense must be recorded on July 1, 2020?

(6) How much Interest Paid must be recorded on July 1, 2020?

FACTS: On January 1, 2020 a corporation issued $600,000 face value

of bonds due in 10 years with a contractual interest rate of 7%.

Interest is payable each July 1 and January 1.

The bonds are priced to yield 6%.

(7) How much interest must be paid every six months on these bonds?

(8) What is the Present Value of these bonds?

(9) Are these bonds issued (i.e., sold) at a Premium or at a Discount?

(10) How much Interest Expense must be recorded on July 1, 2020?