Using Bond Tables; Computing interest expense. Refer to Table I handed out for 10% semiannual coupon bonds.

a. On January 1, Year 1, assume that Commonwealth Edison Company issued $1,000,000 face value, 10% semiannual coupon bonds maturing in 20 years (on December 31, Year 20) at a price to yield 14% per year, compounded semiannually.

b. Same facts as part (a); however, the bonds were sold at a price to yield 8% per year, compounded semiannually.

For each scenario ((a) and (b)), use the effective interest method of computing interest expense.

1. What were the proceeds of the original issue?
2. What was the effective interest expense for the first half of Year 1?
3. What was the effective interest expense for the second half of Year 1?
4. What was the book value of the bonds on January 1, Year 6 (when the bonds have 15 years until maturity)?

Note: Consider whether there is any difference in value for a 15-year bond and a 20-year bond that has a remaining life of 15 year, if both have the same principal, stated interest rate and effective interest rate.

5. What was the effective interest expense for the first half of Year 6?