On July 1, 2014 Botwin Company issues $1,000,000, 10%, bonds payable. Click here and use the sliders provided for the market rate of interest and the number of semi-annual periods to answer the following questions.
| 1. | If the bonds have a 10-year term and are issued when the market rate of interest is 12%: |
| a. | How much semi-annual interest expense will the company report every six months? |
| | $ |
| b. | How much of the bond discount will the company amortize every six months? |
| | $ |
| c. | How much cash interest will the company pay to bondholders every six months? |
| | $ |
| d. | If the market rate of interest remains constant, and the number of periods decreases, the semi-annual discount amortization will increase . |
| 2. | If the bonds have a 5-year term and are issued when the market rate of interest is 14%: |
| a. | How much semi-annual interest expense will the company report every six months? |
| | $ |
| b. | How much of the bond discount will the company amortize every six months? |
| | $ |
| c. | How much cash interest will the company pay to bondholders every six months? |
| | $ |
| d. | If the number of periods remains constant, and the market rate of interest increases, the semi-annual interest expense will . |
