a 1000 par value 18-year bond with annual coupons is bought to yield an annual effective rate of 5%. the amount for amortization

Question

prisoha [69]

1 year ago

7

a 1000 par value 18-year bond with annual coupons is bought to yield an annual effective rate of 5%. the amount for amortization

of premium in the 10th year is 20. the book value of the bond at the end of year 10 is x. calculate x.

Business

1 answer:

marta [7] · Answer 1 · 2024-01-31T09:54:59+03:00

The book value of the bond at the end of year 10 is 1,160

What is the basis for determining premium amortization?

The bond premium amortization is assumed to be determined using the straight-line basis such that bond premium amortized in each year is the same for 18 years of bond investment, in other words, the year 10 bond premium amortization of 20 is the same for all other years.

Total premium on bond issuance=20*18

total premium on bond issuance=360

bond price issued price=par value+ premium=1000+360=1360

As at the end of the 10th year, bond premium amortized thus far is 20 multiplied by 10 years

bond premium amortized=20*10=200

book value of the bond at the end of year 10=1360-200

book value of the bond at the end of year 10=1,160

Find out more about bond premium on:brainly.com/question/14814327

#SPJ1