On January 1, 2020, Buffalo Corporation purchased 350 of the $1,000 face value, 15%, 10-year bonds...
Homework Answers
Solution: Calculation of present value of the bond
| Year | Particulars | Amount | Present Value Factor | Present Value |
| 1-10 | Interest | $1000*350*15% = $52,500 | 5.8892 (11%,10 years) | $52500 * 5.8892 = $309,183 |
| 10 | Redemption Value | $350,000 | 0.3522 | $350,000 * 0.3522 = $123,270 |
| Total present value | $432,453 |
Buffalo corporation should pay $432,453 for purchasing of bonds.
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On January 1, 2020,
Buffalo
Corporation purchased
350
of the $1,000
face value,
15%,
10-year
bonds...
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