Background
Omega (SUB) issued $1 million in 10 year bonds paying cash interest of 9 percent annually
Due to market conditions, omega sold the debt for $938,555 to yield an effective intrest rate
On 1/1/14, Omega decided to retire the debt due to a lower market rate
Alpha (Parent), purchased all the bonds on 1/1/14 for $1,057,466, based on an effective yield
Data
bond issue date
bond issue
term
coupon rate
effective rate
cash proceeds (BV)
reacquisition price
reacquisition rate
retirement date
1/1/2012
1000000 dollars
10 years
0.09 percent
0.1 percent
938555 dollars
1057466 dollars
0.08 percent
1/1/2014
Date
1/1/2012
12/31/2012
12/31/2013
12/31/2014
12/31/2015
Face
value
1000000
1000000
1000000
1000000
1000000
Unamortized
discount
61445
57590
53348
48683
43552
110814
book value
938555
942411
946652
951317
956448
effective
interest
93856
94241
94665
95132
cash
interest
discount
amortized
90000
90000
90000
90000
3856
4241
4665
5132