Ramsey Corp. issued a $2,000,000 of 4% bond to yield 6% (market rate). The bond was issued on 1/1/2000 to provide semi-annual payments and expected to mature in 10 years. The semi-annual payments are to be made every June 30 and December 31. Costs of issuing the bonds amounted to $20,000.

a) Calculate the cash proceeds (price) of this bond on 1/1/2000.

b) Determine the interest expense recognized by Ramsey on 6/30/2000 and 12/31/2000.

c) Determine the book value (or carrying value) of the bond on 1/1/2004, i.e. after 8 semi-annual payments.

d) Calculate the total interest expense recorded by Ramsey if it held the bond to maturity.

e) Assume that the bonds are retired after 4 years ( i.e., on 1/1/2004) for 98 of the par value. Unamortized Bond Issuance Costs remaining in the balance sheet at the date of retirement Calculate the gain or loss associated with this debt retirement.

• f) A second $100,000 semi-annual bond was issued by Ramsey Corp on 7/1/2000 for a cash proceeds of $92,976. The journal entry provided by Ramsey on 12/31/2000 is given as follows:

Interest expense $6,508
Discount or B/P 508
Cash 6,000

i) Determine the annualized coupon rate of the bond.
ii) Determine the annualized yield rate of the bond.