MINING issued 5-year $50 million face , 6% semiannual bond market interest rate 7% what is PV at begining and what is cumulative interest expense to the end of first half of year 2 answer is PV =47,920,849, and cumulative interest expense : 5,051,494 I can not get that cumulative interest expense ? any one help ?
The interest expense is the 7% coupon divided by 2. Since they are asking for half way through year 2, that is three coupon payments. You could roughly estimate the answer to be 3.5% * 3 * $47.9M. That equals $5.030M. In reality, after the first two periods, the PV of the bond would have amortized slightly, so the total interest expense would be closer to the actual answer of $5.051M
N=10, I/Y=3.5, PMT=3%*50M=1.5M, FV=50M, cpt PV=47,920,848.67 2nd PV (activates Amort worksheet), P1=1, P2=3, at 3 arrows down I got 5,050,515.336 Not that far from the answer you indicate.
Agree with map
aaaaa! my stupid , i use coupon rate times pv … thanks !!