Question

On January 1, 2017, Concord Corporation issued eight-year bonds with a face value of $6,300,000 and a stated interest rate of 6%, payable semiannually on starting in July on July 1 and January 1. The bonds were sold to yield 8%.

Table values are:

Present value of 1 for 8 periods at 6% 0.627

Present value of 1 for 8 periods at 8% 0.540

Present value of 1 for 16 periods at 3% 0.623

Present value of 1 for 16 periods at 4% 0.534

Present value of annuity for 8 periods at 6% 6.210

Present value of annuity for 8 periods at 8% 5.747

Present value of annuity for 16 periods at 3% 12.561

Present value of annuity for 16 periods at 4% 11.652

What is the issue price of the bonds? (Round two decimal places, i.e., $10.89)

Answer 1

$ 63,00,000 3% Face Value of Bond Interest rate @6% / 2 Market rate of Return 8%/2 Coupon @ AX 3% (B) 4% 1,89,000 $ PV Annuity Factor (4%, 16) PV Factor (4%, 16) 11.652 0.534 Computation of Issue Price : Present Value of Interest Present Value of face value Issue price of the bonds (B x C) (A x D) $ 22,02,228.00 $ 33,64,200.00 $ 55,66,428.00

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