I'm going to repeat this every period, why?

Because at the end of the term of the bonds, that carrying value,

which is the face amount of the bonds plus the premium I received,

is going to be 10 million.

You'll see, let's go to Excel and we'll take a look at how this mathematics works.

In this segment, we're going to show how it varies when you're given

the yield as opposed to being given the price for

which the bonds have been sold, it's actually easier.

So this is the same spreadsheet that we just prepared for our previous exercise.

Again, we've put all of our variables into a table,

10 million, 16 periods, 8%.

We've calculated the interest that will be paid, and now the carrying value

is the amount that's going to be calculated, not the yield.

So we don't have to use the Goal Seek to come down and

calculate this effective rate, that's given now in the problem.

So instead, that effective rate is going to go into

calculating our net present value of the interest,

and the net present value of the principle at the end of bond issue term.

We total those up now at this effective yield,

which we're given in the problem, that it's been sold at.

And we now know that the carrying value,

the total present value is going to be $10,147,006.

Now in real life, you're going to have to probably combine these two techniques,

because you may get a yield, but it's going to be adjusted for issuance costs.

But in this problem, we kept it simple.

We can assume that the issuance costs are zero.

We'll relax that constraint soon, soon enough.

So here, You can see the same thing.

The total present value comes down to the carrying value.

Again, I'm calculating the interest at the effective rate times the carrying value,

and that just carries on throughout the entire life of the instrument.

Again, I can tell I got the right answer at the bottom because my

final amortized amount is equal to the amount that I'm going to pay at the end.