1. On January 1, 2020, $10 million worth of 8-year bonds with a stated rate of 8% were issued; interest is paid semi-annually on June 30th and Dec 31st. The market interest rates were 7% when the bonds were issued.
a. Calculate the annual interest payment on the bonds.
b. Calculate the amount of interest paid on each semi-annual payment.
c. Calculate the total amount of interest to be paid over the 8 years.
d. Were the bonds issued at a premium or a discount?
2. On January 1, 2020, $4 million worth of 6-year bonds with a stated rate of 9% were issued; interest is paid quarterly on March 31, June 30th, Sept 30th, and Dec 31st. The market rates were 11% when the bonds were issued.
a. Calculate the annual interest payment on the bonds.
b. Calculate the amount of interest paid on each quarterlypayment.
c. Calculate the total amount of interest to paid over the 6years.
d. Were the bonds issued at a premium or a discount?
