the ness company sells $5,000,000 of five-year, 10% bonds at the start of the year. the bonds have an effective yield of 9%. present value factors are below: The amount of bond premium amortization for Year 2 is:

The amount of bond premium amortization for Year 2 is:

=  $35,421.26

Explanation:

a) Data and Calculations:

Face value of bonds = $5,000,000

Selling price of bonds = $5,194,482.56

Premium on bonds = $194,482.56

Coupon interest rate = 10%

Effective yield = 9%

Annual interest payment = $500,000 ($5,000,000 * 10%)

N (# of periods)  5

I/Y (Interest per year)  9

PMT (Periodic Payment)  500000

FV (Future Value)  5000000

Amortization Schedule

PeriodPV                            Annual PMT     Interest        Amortization

Year 1       $5,194,482.56     $500,000.00   $467,503.43      $32,496.57

Year 2      $5,161,985.99      $500,000.00$464,578.74       $35,421.26

Year 3      $5,126,564.73     $500,000.00$461,390.83       $38,609.17

Year 4    $5,087,955.56      $500,000.00$457,916.00     $42,084.00

Year 5     $5,045,871.56      $500,000.00$454,128.44    $45,871.56

End of Year 5 FV = $5,000,000

Results

PV = $5,194,482.56

Sum of all periodic payments$2,500,000.00

Total Interest$2,305,517.44