You can use a calculator or Excel, but use Excel to prepare amortization tables.

Exercise Number 1. Term Bonds - 12 Points

A company issued term bonds with a par value of $ 200,000, a life of 10 years and a nominal rate of 6.50% per annum. The bonds pay interest every six months.

Part A.

1. If the market rate (yield) on the bond issue date was 8.30% per year, at what price were the bonds issued? 2. How much is the interest expense for the second period (semester) of these bonds?

Part B. Answer the same two questions from Part A if the market rate was 4.60% per year.