On January 1, 2020 Wildhorse Co. issued five-year bonds with a face value of $760,000 and...
On January 1, 2020 Wildhorse Co. issued five-year bonds with a
face value of $760,000 and a stated interest rate of 12% payable
semiannually on July 1 and January 1. The bonds were sold to yield
10%.
| Present value table factors are: | |||
| Present value of 1 for 5 periods at 10% | 0.62092 | ||
| Present value of 1 for 5 periods at 12% | 0.56743 | ||
| Present value of 1 for 10 periods at 5% | 0.61391 | ||
| Present value of 1 for 10 periods at 6% | 0.55839 | ||
| Present value of an ordinary annuity of 1 for 5 periods at 10% | 3.79079 | ||
| Present value of an ordinary annuity of 1 for 5 periods at 12% | 3.60478 | ||
| Present value of an ordinary annuity of 1 for 10 periods at 5% | 7.72173 | ||
| Present value of an ordinary annuity of 1 for 10 periods at 6% | 7.36009 | ||
Click here to view factor tables
Calculate the issue price of the bonds. (Round factor
values to 5 decimal places, e.g. 1.25124 and final answer to 0
decimal places, e.g. 458,582.)
| Issue price of bonds | $ |
Homework Answers
Issue price of the bonds = Present value of interest @5% for 10 years + Present value of maturity value @5% for 10 years
= $760,000*6%*7.72173 + 760000*0.61391
= $818682
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