a. Since we know the bonds have a face value of $3 million, and they were traded at $2.958 billion, comment on the effect of market interest rate versus coupon rate on the bonds, state whether this implies a discount or premium. Comment on why Home Depot would be willing to receive less for their bonds (Hint: It has to do with the coupon rate and the amount of interest they pay. Refer to discussion notes).

b. As discussed in class, you can calculate the interest payments by multiplying the face value of the bonds times the coupon rate times one-half (since the interest payments are semiannual). This will give you the interest payments that Home depot will make at June 16th and December 16th.

Consolidated Balance Sheets-USD Jan. 29, 2017 Jan. 31, 2016 $ in Millions Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories Other Current Assets Total Current Assets $2,538 2,216 1,890 11,809 569 16,484 40,426 39,266 17,075 22,191 2,102 1,196 41,973 2,029 12,549 608 17,724 Property and Equipment, at cost Less Accumulated Depreciation and Amortization Net Property and Equipment Goodwill Other Assets Total Assets Current Liabilities: Short-Term Debt 18,512 21,914 2,093 1,235 42,966 350 6,565 1,515 476 1,566 34 710 7,000 1,484 508 1,669 25 542 2,195 14,133 22,349 1,855 296 38,633 Accounts Payable Accrued Salaries and Related Expenses Sales Taxes Payable Deferred Revenue Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses Total Current Liabilities Long-Term Debt, excluding current 1,941 12,524 20,789 1,965 379 35,657 installments Other Long-Term Liabilities Deferred Income Taxes Total Liabilities STOCKHOLDERS' EQUITY Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.776 billion shares at January 29, 2017 and 1.772 billion shares at January 31, 2016; outstanding: 1.203 billion shares at January 29, 2017 and 1.252 billion shares at January 31, 2016 Paid-In Capital Retained Earnings Accumulated Other Comprehensive 9,787 35,519 867 9,347 30,973 (898 508 1,669 25 542 2,195 14,133 476 1,566 34 Sales Taxes Payable Deferred Revenue Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses Total Current Liabilities Long-Term Debt, excluding current installments 22,349 1,855 296 38,633 1,941 12,524 20,789 1,965 379 35,657 Other Long-Term Liabilities Deferred Income Taxes Total Liabilities STOCKHOLDERS' EQUITY Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.776 billion shares at January 29, 2017 and 1.772 billion shares at January 31, 2016; outstanding: 1.203 billion share:s at January 29, 2017 and 1.252 billion shares at January 31, 2016 Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss 9,787 35,519 (867) 9,347 Treasury Stock, at cost, 573 million shares at January 29, 2017 and 520 million shares at January 31, 2016 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 30,973 (898) (40,194) (33,194) 6,316 4,333 DEBT The Company has commercial paper programs that allow for borrowings up to $2.0 billion. All of the Company's short-term borrowings in fiscal 2016 and 2015 were under these commercial paper programs. In connection with these programs, the Company has a back-up credit facility with a consortium of banks for borrowings up to $2.0 billion. The credit facility expires in December 2019 and contains various restrictive covenants. Short-Term Debt under the commercial paper programs was as follows (amounts in millions) Fiscal Year Ended January 29, 2017 January 31, 2016 Balance outstanding at fiscal year-end Maximum amount outstanding at any month-end Average daily short-term bo Weighted average interest rate 710 350 350 69 0.34% rrowings 51 0.63% The Company's Long-Term Debt at the end of fiscal 2016 and 2015 consisted of the following (amounts in millions): January 29, 2017 January 31, 2016 5.40% Senior Notes: due March 1, 2016; interest payable semi-annually on March 1 and September 1 Floating Rate Senior Notes; due September 15, 2017; interest payable quarterly on March 15, June 15, September 15 and December 15 2.25% Senior Notes; due September 10, 2018, interest payable semi-annually on March 10 and September 10 2.00% Senior Notes: due June 15, 2019, interest payable semi-annually on June 15 and December 15 3.95% Senior Notes: due September 15, 2020: interest payable semi-annually on March 15 and September 15 4.40% Senior Notes; due April 1, 2021; interest payable semi-annually on Ap 1 and October 2.00% Senior Notes; due April 1, 2021; interest payable semi-annually on Apri 1 and October1 2.625% Senior Notes; due June 1, 2022; interest payable semi-annually on June 1 and December 1 2.70% Senior Notes: due April 1, 2023; interest payable semi-annually on April 1 and October1 3.75% Senior Notes; due February 15, 2024, interest payable semi-annually on February 15 and August 15 3.35% Senior Notes: due September 15, 2025: interest payable semi-annually on 499 499 1,151 1,156 996 994 509 524 997 996 1,341 1,241 1,240 996 995 1,092 1,091 3.75% Senior Notes; due February 15, 2024; interest payable semi-annually on February 15 and August 15 3.35% Senior Notes; due September 15, 2025; interest payable semi-annually on March 15 and September 15 3.00% Senior Notes: due April 1, 2026; interest payable semi-annually on April 1 and October 1 2.125% Senior Notes: due September 15, 2026; interest payable semi-annually on March 15 and September 15 5.875% Senior Notes; due December 16, 2036: interest payable semi-annually on June 16 and December 16 5.40% Senior Notes, due September 15, 2040; interest payable semi-annually on March 15 and September 15 5.95% Senior Notes; due April 1, 2041; interest payable semi-annually on April 1 and October 1 4.20% Senior Notes, due April 1, 2043; interest payable semi-annually on April 1 and October 1 4.875% Senior Notes: due February 15, 2044; interest payable semi-annually on February 15 and August 15 4.40% Senior Notes; due March 15, 2045; interest payable semi-annually on March 15 and September 15 4.25% Senior Notes; due April 1, 2046; interest payable semi-annually on April 1 and October 1 3.50% Senior Notes, due September 15, 2056; interest payable semi-annually on March 15 and September 15 Capital Lease Obligations; payable in varying installments through January 31, 2055 Other Total debt Less current installments Long-Term Debt, excluding current installments 1,092 1,091 994 993 1,286 984 2,947 2,946 495 988 987 495 988 988 978 976 1,584 977 976 1,235 971 878 763 22,891 542 22,349 20,866 20,789