On January 1, 2021, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:   Payment   Cash Payment   Effective Interest   Increase in Balance   Outstanding Balance                   7,218,650   1   270,000   288,746   18,746   7,237,396   2   270,000   289,496   19,496   7,256,892   3   270,000   290,276   20,276   7,277,168   4   270,000   291,087   21,087   7,298,255   5   270,000   291,930   21,930   7,320,185   6   270,000   292,807   22,807   7,342,992   ~   ~   ~   ~   ~   ~   ~   ~   ~   ~   ~   ~   ~   ~   ~   38   270,000   350,010   80,010   8,830,251   39   270,000   353,210   83,210   8,913,461   40   270,000   356,539   86,539   9,000,000       Required: 1. What is the face amount of the bonds? 2. What is the initial selling price of the bonds? 3. What is the term to maturity in years?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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On January 1, 2021, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:
 

Payment   Cash
Payment
  Effective
Interest
  Increase in
Balance
  Outstanding
Balance
 
                7,218,650  
1   270,000   288,746   18,746   7,237,396  
2   270,000   289,496   19,496   7,256,892  
3   270,000   290,276   20,276   7,277,168  
4   270,000   291,087   21,087   7,298,255  
5   270,000   291,930   21,930   7,320,185  
6   270,000   292,807   22,807   7,342,992  
~   ~   ~   ~   ~  
~   ~   ~   ~   ~  
~   ~   ~   ~   ~  
38   270,000   350,010   80,010   8,830,251  
39   270,000   353,210   83,210   8,913,461  
40   270,000   356,539   86,539   9,000,000  
 

 

Required:
1. 
What is the face amount of the bonds?
2. What is the initial selling price of the bonds?
3. What is the term to maturity in years?
4. Interest is determined by what approach?
5. What is the stated annual interest rate?
6. What is the effective annual interest rate?
7. What is the total cash interest paid over the term to maturity?
8. What is the total effective interest expense recorded over the term to maturity?

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