Question

Required information The following information applies to the questions displayed below] On January 1, 2021, Frontier World issues $40.4 million of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride. Required: 1-a. If the market rate is 8%, calculate the issue price (EV of $1. PV of $1. EVA of S1, and PVA OS1) (Use appropriate factor(s) from the tables provided. Do not found interest rate factors. Enter your answers in dollars not in millions, Round Market interest rate" to 1 decimal place. Round your final answers to the nearest whole dollar) Bond Characteristics Face amount Amount 40,400,000 Interest payment Periods to maturity Market Interest rate Issue price b. The bonds will issue at A Discount A Premium Face amount

Answer 1

1a. Issue price is:

Bond Characteristics	Amount
Face Amount	40,400,000
Interest payment	1,818,000
Periods to maturity	40 semi annual
Market interest rate	4% semi-annual
Issue Price	44,398,140

1b. Bond is issued at a premium.

2a. Issue price is:

Bond Characteristics	Amount
Face Amount	40,400,000
Interest payment	1,818,000
Periods to maturity	40 semi annual
Market interest rate	4.5% semi-annual
Issue Price	40,400,000

2b. Bond is issued at face amount

3a. Issue price is:

Bond Characteristics	Amount
Face Amount	40,400,000
Interest payment	1,818,000
Periods to maturity	40 semi annual
Market interest rate	5% semi-annual
Issue Price	36,933,865

3b. Bond is issued at a discount.