On January 1, 2008, Michelle Co. issued ten-year bonds with a face value of $1,000,000 and a

Question:

On January 1, 2008, Michelle Co. issued ten-year bonds with a face value of $1,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%.

Directions (20 points): Prepare your responses on a separate Excel spreadsheet as directed on the Problem Set 3 directions.

a. Calculate the issue price of the bonds.

b. Without prejudice to your solution in part a, assume that the issue price was $884,000. Prepare the amortization table for 2008, assuming that amortization is recorded on interest payment dates.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...