Interpreting Bond Footnote Disclosures and Computing Effective Interest Rate In October 2012, French real estate company Foncire des Rgions issued bonds with a total face

Interpreting Bond Footnote Disclosures and Computing Effective Interest Rate In October 2012, French real estate company Foncière des Régions issued bonds with a total face value of

€500 million. The bond proceeds were €504.087 million. The 2012 annual report has the following note.

Foncière des Régions launched a bond issue as described below:

Issue date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19/10/2012 Issue amount ($M) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Nominal rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.875%

Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16/01/2018

a. Determine the annual interest payments. (????int: Nominal rate of 3.875% is the coupon or face rate of interest.)

b. Assume the bonds are due in 5.25 years (October 2012 till January 2018). Determine the effective interest rate.

c. What amount of interest expense does the company report related to these bonds for the first full year after they are issued?