BONDS (Discount)

Question 1

1) Interest Rate

Answer 1

Face Amount x Contract Rate

Question 2

2) # of times interest will be paid

Answer 2

Answer of 1/ # of times int. is paid

Question 3

3) Discount Amount

Answer 3

Face Amount - Cash proceeds (selling price)

Question 4

4) Amortization of Discount

Answer 4

A) #3/ Term

B) 4A / # of times int. is paid

Question 5

The book value will _______ after amortization until the BV = MV

Answer 5

Increase