The National Bank raised capital through the sale of $150 million face alue of eight percent coupon rate, ten year bonds. The bonds paid interest semiannualy and were sold at at time when equivalent risk- rated bonds carried a yield rate of ten percent. Calaculate the proceeds that the bank recieved from the sale of the eight percent bonds. How will the bonds be disclosed on the balance sheet immediately following the sale? Calaculatt the interest expense on the bonds for the first year that the bonds are outstanding. Calculate the book value of the bonds at the end of the first year.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
The National Bank raised capital through the sale of $150 million face alue of eight percent coupon rate, ten year bonds. The bonds paid interest semiannualy and were sold at at time when equivalent risk- rated bonds carried a yield rate of ten percent.
Calaculate the proceeds that the bank recieved from the sale of the eight percent bonds. How will the bonds be disclosed on the balance sheet immediately following the sale? Calaculatt the interest expense on the bonds for the first year that the bonds are outstanding. Calculate the book value of the bonds at the end of the first year.
| Question 1: Fill in the Bond Amortization Table and the highlighted cells using the information from E9.19 in the Data Tab. Show only positive numbers in the first table. Use Excel to do the calculations and don't round. | ||||||
| Period | Cash Payments | Interest Expense | Amortized Discount | Discount Balance | Face Value | Book Value |
| 0 | $131,306,684.00 | 150,000,000 | $150,000,000.00 | |||
| 1 | ||||||
| 2 | ||||||
| Proceeds at Issuance | ||||||
| Total Interest Expense for 1st Year | ||||||
| Balance Sheet Disclosure | At Issuance or Sale | End of Year 1 | ||||
| Bonds Payable (aka Face Value) | ||||||
| Discount (show as a negative number) | ||||||
| Bonds Payable, Net (aka Book Value) |
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