Question

A company issued 10%. 20-year bonds with a face amount of $87 million. The market yield for bonds of similar risk and maturity is 10% Interest is paid semiannually. At what price did the bonds sell? (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Enter your answers in whole dollars. Round final answers to the nearest whole dollar.) Table values are based on: 10 Amount Present Value Cash Flow Interest Principal Price of bonds

Answer 1

Table values are based on :- i= 5% Cashflow Interest Principal Tabel factor Present Amounts at 5% Value $ 4,350,000 17.15910 74,642,085 87,000,000 0.14205 12,358,350 Price of the Bonds 87,000,435 Interest payments is = Face value * semi annual interest rate Interest payments is = (87*1000000*5%) Interest payments is = 5 4,350,000/- Table factor at 5% for 40 periods is = 17.1591 Table factor at 5% at 40th period is = 0.14205 Since Coupon Rate and Interest rate are same, Face value is equal to Issue price. Answer is $ 87,000,000/.