R. J. Winter Co. recently issued $100,000, 10-year deferred interest bonds. The bonds have a stated rate of 10%, and interest is to be paid in 10 semiannual payments beginning in Year 6. The market rate of interest on the date of issuance was 8%.

Instructions:

1. Compute the maximum amount an investor should pay for these bonds.

2. Prepare a bond amortization schedule for R. J. Winter, assuming the effective interest method is used.