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Bonds are tradable assets that are securitized versions of the corporatedebt that the company issue. Bonds are fixed-income instruments since they verifiably pay debt holders a fixed interest rate(coupon).

Calculation of selling price of the bond

Working note:

$\begin{array}{rcl}Interest on semi-annual bond& =& \$1,000×\frac{9}{100}×\frac{6}{12}\\ & =& \$45\\ & & \end{array}$

Ten months (from March 1, 2017, to December 31, 2017), with an effective interest rate (yield) of 11%, would be covered by interest expenses. It is made up of nominal interest at 9 percent that has been prorated to account for bond discount amortization. The bond discount should be amortized during the period the bonds will be outstanding, or from the date of sale (March 1, 2017) until the maturity date, using the effective-interest method (March 1, 2022)

In the second year of the bond issue's existence, the amount of bond discount amortization would be smaller. The effective-interest method of amortization uses a constant interest rate based on a fluctuating carrying value, which causes the amortization to increase each year when a bond markdown occurs.

Retirement of the bonds would cause a loss from extinguishing debt, which should be considered when calculating net income and designated as an ordinary loss.