The documents provide examples of calculating interest expenses and proceeds from the sale of bonds.
Document 1 calculates the quarterly and annual interest expenses for a 1-year $10,000 loan at 8% interest.
Document 2 calculates the effective interest rate of 4.8% for a $500,000 loan with an 8% rate after a 40% tax deduction.
Document 3 outlines details of $1,000,000 bonds sold at 98% of par value with a 6% interest rate paid quarterly.
Document 4 demonstrates calculations for $1,000,000 bonds sold at 101% of par value with a 5% interest rate.
Documents 5 and 6 provide additional examples of bond
The documents provide examples of calculating interest expenses and proceeds from the sale of bonds.
Document 1 calculates the quarterly and annual interest expenses for a 1-year $10,000 loan at 8% interest.
Document 2 calculates the effective interest rate of 4.8% for a $500,000 loan with an 8% rate after a 40% tax deduction.
Document 3 outlines details of $1,000,000 bonds sold at 98% of par value with a 6% interest rate paid quarterly.
Document 4 demonstrates calculations for $1,000,000 bonds sold at 101% of par value with a 5% interest rate.
Documents 5 and 6 provide additional examples of bond
The documents provide examples of calculating interest expenses and proceeds from the sale of bonds.
Document 1 calculates the quarterly and annual interest expenses for a 1-year $10,000 loan at 8% interest.
Document 2 calculates the effective interest rate of 4.8% for a $500,000 loan with an 8% rate after a 40% tax deduction.
Document 3 outlines details of $1,000,000 bonds sold at 98% of par value with a 6% interest rate paid quarterly.
Document 4 demonstrates calculations for $1,000,000 bonds sold at 101% of par value with a 5% interest rate.
Documents 5 and 6 provide additional examples of bond
The documents provide examples of calculating interest expenses and proceeds from the sale of bonds.
Document 1 calculates the quarterly and annual interest expenses for a 1-year $10,000 loan at 8% interest.
Document 2 calculates the effective interest rate of 4.8% for a $500,000 loan with an 8% rate after a 40% tax deduction.
Document 3 outlines details of $1,000,000 bonds sold at 98% of par value with a 6% interest rate paid quarterly.
Document 4 demonstrates calculations for $1,000,000 bonds sold at 101% of par value with a 5% interest rate.
Documents 5 and 6 provide additional examples of bond
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Brief Exercise 10.
Loan amount 10,000
Loan time period 1 year Interest rate 8% per annum Date of borrowing April. 1 Interest payments Quartely 3-months
Cash payment for interest expense in Y1
Interest exp per year 800
Interest exp per month 66.67 Interest exp per quarter 200 Interest exp for Y1 (3 quarters) 600
Cash payment for interest expense in Y2
Interest exp for 4th quarter (Y2) 200
Total interest exp 800
Brief Exercise 10.2
Loan amount 500,000
Interest rate 8% Tax rate 40%
Before income tax interest cost 40,000
Tax savings 16,000 Interest cost (net of income tax) 24,000
Effective interest rate net of income tax 4.80%
i(1-tax rate)
Applying effective interest rate 24,000
Brief Exercise 10.3
Bonds sold 1,000,000
Bond interest rate 6% Interest is paid quarterly Bonds sold at 98
Amount received from sale of bonds 980,000
Annual interest $ 60,000
Quarterly interest $ 15,000 Brief Exercise 10.4 Brief Exercise 10.5 Bonds sold 1,000,000 Bonds sold Bond interest rate 5% Bonds sold at Bonds sold at 101 Bond interest rate Life of bonds Amount received from sale of bonds 1,010,000
Annual interest $ 50,000 Cash received from sale of bonds
Quarterly interest $ 12,500 Cash paid for interest in 1st year
Discount on sale of bonds
1st year interest exp recognized
Interest paid Plus: Amortization of discount 1st year interest exp recognized ef Exercise 10.5 Brief Exercise 10.6 $ 500,000 Bonds sold $ 700,000 97 Bonds sold at 102 5% Bond interest rate 6.50% 10 years Life of bonds 10 years
$ 485,000 Cash received from sale of bonds $ 714,000
$ 25,000 Cash paid for interest in 1st year $ 45,500