Question

Question 5 View Policies Current Attempt in Progress Carla Corporation issues $530,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Click here to view factor tables. Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) Issue price of the bonds $ e Textbook and Media Save for Later Attempts: 0 of 10 used Submit Answer

Answer 1

Solution 5. Face Value of Bonds Coupon rate Half year Coupon rate $ 5,30,000 9.00% 4.50% Duration = 10 years x 2 20 years Table showing computation of Price of Bond PV factor Year Amount (a) @ 5% (b) Product (axb) 1 $ 23,850.00 0.95238 $ 22,714.29 1 $ 23,850.00 0.90703 $ 21,632.65 2 $ 23,850.00 0.86384 $ 20,602.53 2 $ 23,850.00 0.82270 $ 19,621.45 3 $ 23,850.00 0.78353 $ 18,687.10 3 $ 23,850.00 0.74622 $ 17,797.24 4 $ 23,850.00 0.71068 $ 16,949.75 4 $ 23,850.00 0.67684 $ 16,142.62 5 $ 23,850.00 0.64461 $ 15,373.92 5 $ 23,850.00 0.61391 $ 14,641.83 6 $ 23,850.00 0.58468 $ 13,944.60 6 $ 23,850.00 0.55684 $ 13,280.57 7 $ 23,850.00 0.53032 $ 12,648.16 7 $ 23,850.00 0.50507 $ 12,045.87 8 $ 23,850.00 0.48102 $ 11,472.26 8 $ 23,850.00 0.45811 $ 10,925.96 9 $ 23,850.00 0.43630 $ 10,405.68 9 $ 23,850.00 0.41552 $ 9,910.17 10 $ 23,850.00 0.39573 $ 9,438.25 10 $ 23,850.00 0.37689 $ 8,988.81 Repayment of FV $ 5,30,000 0.37689 $ 1,99,751.43 Issue price of Bond $ 4,96,975

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