Question 1 will help you understand the relations between bond prices, yields, interest expense, coupon payments and ending principals.

Suppose the CFO of ExxonMobil (rated AAA) is considering the flotation of a 2 year ZCB with a FV of $ 100mm. The bond will be priced to yield 15% at the time of flotation. Prepare an amortisation schedule for the bond, describing the time path of the loan principal, interest expense and all payments. Use the table below and give your answer to decimal places in $.

Hint: Beginning Principal for each year (e.g. Yr 2) equals end principal for previous year (i.e. Yr 1) whereas the payments that the company makes are either the coupon or the face value payments

Yr	Beginning Yr Principle	Interest Expense	Annual Payment	End Yr Principle
1
2