Premium Bond Liability on Balance Sheet
Source: cfa.minute-class.com This movie clip teaches you how to treat a premium bond with Excel spreadsheet. The important point is market rate when the bond was issued has to be used in all the discounting and interest calculation.
A corporate issued $100M bond with annual coupon payment of 8% on Jan 1, 2000. When the bond was issued, the market rate was 7%. Calculate the balance sheet liabilities in 2000, 2001and 2002.