Calculate the annual interest payment on the bonds. Calculate the amount of interest paid on each semi-annual payment. Calculate the total amount of interest to be paid over the 8 years. Were the bonds issued at a premium or a discount?

Market interest rates

On January 1, 2020, $10 million worth of 8-year bonds with a stated rate of 8% were issued; interest is paid semi-annually on June 30th and Dec 31st. The market interest rates were 7% when the bonds were issued.

• Calculate the annual interest payment on the bonds.
• Calculate the amount of interest paid on each semi-annual payment.
• Calculate the total amount of interest to be paid over the 8 years.
• Were the bonds issued at a premium or a discount?

On January 1, 2020, $4 million worth of 6-year bonds with a stated rate of 9% were issued; interest is paid quarterly on March 31, June 30th, Sept 30th, and Dec 31st. The market rates were 11% when the bonds were issued.

• Calculate the annual interest payment on the bonds.
• Calculate the amount of interest paid on each quarterly payment.
• Calculate the total amount of interest to paid over the 6years.
• Were the bonds issued at a premium or a discount?