{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

15.3 Bond Schedules[1]

# 15.3 Bond Schedules[1] - increased gradually from purchase...

This preview shows pages 1–4. Sign up to view the full content.

4/10/2010 1 15.3 Bond Schedules Amortization of Premium Premium is not recovered at maturity To avoid capital loss the premium is written down gradually from purchase date to maturity date Initial Book Value = BV 0 = Purchase Price Final Book Value = BV n = Redemption Value Record bond interest (PMT) and interest on book value at yield rate (BV × i)

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
4/10/2010 2 A \$1,000 bond at j 2 = 10% is redeemable in 2 years is purchased to yield j 2 = 8%. Construct the schedule of amortization of premium. Compute the purchase price: Bond rate: j 2 = b = PMT = FV = N = I/Y = P/Y = C/Y = CPT PV = Premium = Schedule of Amortization of Premium Payment Interval Bond Interest Interest on BV at yield Premium Amortized Book Value Remaining Premium 0 1 2 3 4 TOTAL
4/10/2010 3 Accumulation of Discount To avoid capital gain at maturity the book value is

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: increased gradually from purchase date to maturity date • Initial Book Value = BV = Purchase Price • Final Book Value = BV n = Redemption Value • Record bond interest (PMT) and interest on book value at yield rate (BV × i) A \$1,000 bond at j 2 = 8% is redeemable in 2 years is purchased to yield j 2 = 10%. Construct the schedule of amortization of premium. Compute the purchase price: Bond rate: j 2 = b = PMT = FV = N = I/Y = P/Y = C/Y = CPT PV = Discount = 4/10/2010 4 Schedule of Accumulation of Discount Payment Interval Bond Interest Interest on BV at yield Discount Accumulated Book Value Remaining Discount 1 2 3 4 TOTAL Homework : Ex. 15.3, pg. 654: A #1, 3...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern