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    jahubb Posts: 27, Reputation: 1
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    Feb 7, 2008, 04:39 PM
    Callable bonds
    Some one please help, I've been reading my one paragraph over and over, There just isn't enough information to figure this out. Here is the problem
    On January 2, 2008 a company issued $500,000, 10 year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8% and the market rate is 6%
    1. The interest expense on the bonds at June 30, 2008 is
    a. $2,764 b. $17,236 c. $20,000 d. $22,764
    My answer was B.
    2. The annual cash payment (paid in semiannual payments) on the bonds is?
    a. 40,000 b. 30,000 c. 20,000 d. 15,000
    My answer is A.
    3. What is the carrying value of the bonds after the first interest payent is made on June 30, 2008?
    a. 574,540 b. 571,776 c. 568,920 d. 500,000
    My answer is B.
    4. What is the carrying value of the bonds at the end of 10 years.
    a. 574,540 b. 525,000 c. 500,000 d. 425, 460
    My answer is C.
    5. At the maturity date, besides an interest payment the company would repay the bondholders?
    a. 574,540 b. 520,000 c. 500,000 d. only the last interest payment
    6. If the company redeems the bonds at the call price of 102 at December 31, 2008 after using the effective interest method for the year, what is the amount of the gain or loss?
    a. Gain of 58,929 b. Loss of 58,929 c. Gain of 59,012 d. Loss of 59,012
    Please help, I've really tried to do this on my own, if there is anyone good at this please answer this and help me!! Thanks in advance

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