Homework Answers
Face value of the bonds = $100,000
Stated interest rate = 10%
Annual interest paid on the bonds = $100,000 x 10% = $10,000
Market interest rate = 8%
Therefore,
Issuance price at 1/1/2020
= [$10,000 x PVA (8%, 3)] + [$100,000 x PV (8%, 3)]
= [$10,000 x 2.57710] + [$100,000 x 0.79383]
= $105,154
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On January 1, 2020, Tiffany and Company issues 3 year bonds
payable with a face value $100,000, stated interest 10% payable at
12/31 each year. Market interest rate is 8%. What should be the
issuance price at 1/1/2020?
Please help with explanation and steps.
6% 1.06000 1.12360 1.19102 1.26248 1.33823 Table 1: Future Value of 1 8% 9% 1.08000 1.09000 1.16640 1.18810 1.25971 1.29503 1.36049 1.41158 1.46933 1.53862 10% 1.10000 1.21000 1.33100 1.46410 1.61051 12% 1.12000 1.25440 1.40493 1.57352 1.76234...
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