Answer:
The bonds were issed at $ 355,834,328.88 dollars
Interest expense for the first year:
interest expense: $ 7,116,686.58
Explanation:
The bond value will be equal to the present value of the coupon payment and maturity:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
Coupon: 320,000,000 x 2.5% = 8,000,000
time: 15 years x 2 payment per year = 30
rate 4% divide by 2 = 0.02
[tex]8000000 \times \frac{1-(1+0.02)^{-30} }{0.02} = PV\\[/tex]
PV $179,171,644.4080
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 320,000,000.00
time 30.00
rate 0.02
[tex]\frac{320000000}{(1 + 0.02)^{30} } = PV[/tex]
PV 176,662,684.47
PV coupon 179,171,644.41 + PV m 176,662,684.47 = $ 355,834,328.88
proceeds 355,834,329
face value 320,000,000
premium on bonds payable 35,834,329
interest expense:
carrying value x market rate:
355,834,329 x 2% = 7,116,686.58
