Fourteen Company issued $10,000,000 of 8% bonds on January 1, 2015. The bonds pay interest on June 30 and December 31, mature on
December 31, 2024, and are callable at 102. On the issue date, bonds of similar risk and maturity yielded 7%. Fourteen Company called the bonds on January 1, 2017. Fourteen Company accounts for bonds using the effective interest method.
Determine the amount of discount of premium amortization Fourteen would recognize on June 30, 2015. (Round the final answer to the nearest dollar. Do not use dollar signs or commas when inputting the answer
Determine the amount of discount of premium amortization Fourteen would recognize on June 30, 2015. (Round the final answer to the nearest dollar. Do not use dollar signs or commas when inputting the answer
1 answer:
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Answer:
<em>It will take 9 months longer to repay this loan</em>
Explanation:
<u>Financial Loan Payments</u>
Let's assume a loan has been received for a present value PV at an interest rate i during n periods. Being R the amount of each payment, then
Solving for n we have
The first agreement of payment has the following data
Computing n
The new agreement changes R to 225, thus
This means that it will take 9 months longer to repay this loan