Question

Question 2 View Policies Current Attempt in Progress Sunland Company is about to issue $309,200 of 10-year bonds paying an 11% nterest rate, with interest payable sem annually. The discount rate for such securities is 1 % Click here to view the factor table. For calculation purposes, use 5 decimal places as displayed in the factor table provided) How much can Sunland expect to receive for the sale of these bonds? (Round answer to O decimal places, eg. 2,575) Sunland can expect to receive eTextbook and Media Attempts:0 of 5 used Save for Later Check Answer Prev Next Send to Gradebook

Answer 1

Computation of Issue Price of the Bonds

Particulars	Amount
Present value of principal amount	$96,409
Present value of Interest Payment	$195,058
Issue Price of the bonds	$291,467

Calculations:

Present Value of Bonds Principal amount =

Present Value Factor based on 6% for 20 periods X Principal amount of bonds

= 0.31180 X $309,200

= $96,409

Present Value of Interest Payment for 20 periods =

Present Value Annuity Factor based on 6% for 20 period X *Semi-annual Interest Payment based on 5.5%

= 11.46992 X $17,006

= $195,058

*Semi-annual Interest Payment based on interest rate

$309,200 X 5.5/100 = $17,006

	Periods	Interest Rate	Discount Rate
Semi-annually	20 periods (10 years / 2)	5.5% (11% / 2)	6% (12 / 2)