15.3 Bond Schedules[1]

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

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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)
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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
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4/10/2010 3 Accumulation of Discount To avoid capital gain at maturity the book value is
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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...
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15.3 Bond Schedules[1] - increased gradually from purchase...

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