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the gorman group issued $860,000 of 9% bonds on june 30, 2021, for $945,110. the bonds were dated on june 30 and mature on june 30, 2041 (20 years). the market yield for bonds of similar risk and maturity is 8%. interest is paid semiannually on december 31 and june 30.

Answer :

Rafikiedu08go

Interest is paid semiannually on December 31 and June 30, so, the Amortisation of the Premium on the Bond is $931.42.

Dec 31, 2018             Amount         Interest Rate           Total

Interest Expense  $9,45,110.00    X        4%          =  $37,804.40

Cash                  $8,60,000.00    X          5%             =  $38,700.00

Amortisation of Premium on Bond           =  $895.60

June 30, 2019    Amount           Interest Rate      Total

Interest Expense      $9,44,214.40     X        4.0%           = $37,768.58

(945110-895.60)

Cash                  $8,60,000.00     X         4.5%          = $38,700.00

Amortisation of Premium on Bond          =  $931.42

Bond yield is the profit an investor makes from a bond investment. Bonds can be bought for more than their face value, known as a premium, or for less than their face value, known as a discount. Divided by the bond's market price, the current yield represents the bond's coupon rate.

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