Math Problem Statement
Metlock Electronics Ltd. issued $690,000 of 15-year, 6.0% bonds on January 1, 2025, when the market interest rate was 5.0%. The cash received at the issuance of the bond was $762,209.51. Interest is payable semi-annually on July 1 and January 1. Metlock has a December 31 year end.
Prepare a bond amortization schedule for the first four interest periods, using the effective-interest method. (Round answers to 2 decimal places, eg. 15.75.)
Solution
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Math Problem Analysis
Mathematical Concepts
Finance Mathematics
Bond Amortization
Effective-Interest Method
Time Value of Money
Formulas
Interest Payment = Face Value × Stated Rate ÷ 2
Interest Expense = Carrying Amount × Market Rate ÷ 2
Premium Amortization = Interest Expense - Interest Payment
Theorems
Effective Interest Rate Method
Amortization of Bond Premium
Suitable Grade Level
College or University Level (Finance/Accounting Courses)
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