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Exercise 9-90 (Appendix 9A) Calculating Bond Issue Price On January 1, 2020, University Theatres issued $500,000...

Exercise 9-90
(Appendix 9A) Calculating Bond Issue Price

On January 1, 2020, University Theatres issued $500,000 face value of bonds. The stated rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in 15 years.

If required, round your answers to the nearest whole dollar. Follow the format shown in present value tables as you complete the requirements below.

Required:

a. Assuming the market rate of interest is 6%, calculate at what price the bonds are issued.
$

b. Assuming the market rate of interest is 10%, calculate at what price the bonds are issued.
$

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Bonds are priced at the present value of the two future cash flows, periodic interest payments, and repayment of the principal.

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Answer #1

(a) Bonds Issue Price Period Amount Puf @ 3% rest 1-30 $ 20,000 19.6004 Tsooooo XY7] 30 $ 500,000 0.412 Issue Price 2 Pu 3920

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