If he were that kind of hands-on manager, this mess might not have happened in the first place.
The real risk-free rate is 4%. 1. The real risk-free rate is 4%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.
At the time of issuance, market interest rate is 12%. As explained in Exercise 1, the price of bonds is $463,202, and bonds will be sold at $36,798 discount from the face amount of $500,000. Calculate the amortization of discount on bonds using effective interest method.