Answer:- The issue price of the bonds is = $532486.
Explanation-Calculation of selling price of bond at issuance=
B0 =C/2 {1-(1+r/2)-2t}/ r/2 +F/(1+r/2)-2t
Where:-
Bo = Bond price
C= Coupon payment
r = Interest Rate
F= Face value
t = Years/Periods
Since the interest is paid semi-annually the bond interest rate per period is 4.5% (= 9%/ 2), the market interest rate is 5% (= 10%/ 2) and number of time periods are 22 (= 2*11). Hence, the price of the bond is calculated as the present value of all future cash flows as shown below:-
Price of Bond =4.5%*$570000*{1-(1+5%)-22/5%} +$570000/(1+5%)22
=($25650*13.16300)+ ($570000*0.34185)
= $337631+$194855
=$532486
Brief Exercise 14-1 Blossom Corporation issues $570,000 of 9% bonds, due in 11 years, with interest...
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final answer to 0 decimal places e.g.
58,971.)
Issue price of the bonds
$
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