Question

Garcia Company issues 9.00%, 15-year bonds with a par value of $380,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 6.00%, which implies a selling price of 129 3/8. Confirm that the bonds' selling price is approximately correct. Use present value Table B1 and Table B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table values in calculations. Round your other final answers to nearest whole dollar amount.) = = Selling Price $ 491,644 P resent Value Par Value x Price 380,000 129 3/8 Cash Flow Table Value $380,000 par (maturity) value $17,100 interest payment Price of Bond Difference due to rounding of table values 491.644

need help answering question, pls calculation if possible

Answer 1

Answer

• Requirement, as asked

Par Value	Price	Selling Price
$380,000	129 3/8	$491,625
Cash Flow	Table Value	Present value
$ 380000 par value	0.412 [3% for 30th period]	$156,560
$ 17100 interest payment	19.6004 [3% for 30th period]	$335,167
Price of Bond		$491,727
Difference due to rounding off		($102)

• Concept

Bonds issue price is calculated by ADDING the:

Discounted face value of bonds payable at 'applicable' market rate of interest [Face value x PV Factor], and

Discounted Interest payments amount (during the lifetime) at 'applicable' market rate of interest [Interest payment x PV Annuity factor]