On January 1, Year 6, Trembley Corporation issued $1,000,000 face value, 20-year bonds. The bonds carry coupon interest of 6% per year, payable semiannually on June 30 and December 31. The bonds were initially priced on the market to yield 8%, compounded semiannually (for an effective annualized yield greater than 8 percent).
Required:
a. Compute the issue price of these bonds on Jan 1, Year 6.
b. Compute the amount of interest expense on these bonds for Year 6 (both six month periods) assuming that the firm uses the effective-interest method of amortizing bond premium or discount.