Question

James Corporation is planning to issue bonds with a face value of $509,500 and a coupon rate of 6 percent. The bonds mature in 15 years and pay interest semiannually every June 30 and December 31. All of the bonds will be sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.) Required Compute the issue (sale) price on January 1 of this year for each of the following independent cases: a. Case A: Market interest rate (annual): 4 percent. Issue price b. Case B: Market interest rate (annual): 6 percent. Issue price $ 509,500 c. Case C: Market interest rate (annual): 8.5 percent. Issue price

Answer 1

a)

K10 f10*110 30 2.00% Amount Factor Present value 10 Interest 15,285 22.3965 $ 342,331 11 Principal $509,500 0.5521 $ 12 281,295 13 Issue price $623,625

b)

30 3.00% n= Amount Factor Present value Interest 15,285 19.6004 $ 299,592 Principal 509,500 0.4120 $ 209,914 Issue price $509,506

c)

n= 30 4.25% Amount Factor Present value Interest 15,285 16.7790$ 256,467 Principal 509,500 0.2869 $ 146,176 Issue price $402,643