Question

Exercise 5-16 (Algo) Price of a bond [LO5-9,5-10] On September 30, 2021, the San Fillipo Corporation issued 8% stated rate bonds with a face amount of $460 million. The bonds mature on September 30, 2041 20 years). The market rate of interest for similar bonds was 10%. Interest is paid semiannually on March 31 and September 30. (FV of $1. PV of $1., FVA of $1. PVA of $1. FVAD of Stand PVAD of $1 (Use appropriate factor(s) from the tables provided.) Required: Determine the price of the bonds on September 30, 2021. (Enter your answers in whole dollars. Round your final answers to nearest whole dollar amount.) Table values are based on: 401 Cash Flow Amount Present Value Interest Principal Price of bonds

Answer 1

1 Table Values are Based on: Answer 40 n = 5% i = Cash Flow Amount Present Value Interest $18,400,000 $315,727,256 Principal $460,000,000 $65,343,000 $381,070,256 Price of Bonds Interest $460 millions x 8% x 1/2 $18.4 million Explanations $460 million Principal =$184,00,000 x PVAF (5%, 40 period) = $184,00,000 x 17.15909 Present Value of Interest = $315,727,256 Present Value of Principal = $460,000,000 x PVIF (5%, 40 period) =$460,000,000 x 0.14205 = $65,343,000

Present Value i= Payment n Year Received 2 $6,500 $6,019 8% 2022 1 $7,350 $6,301 8% 2023 2 $9,200 $6,762 8% 2025 $10,650 $6,711 2027 8% 6 $25,794 Total PV$1, i= 8% Payment $6,500 Explanations Present Value First Payment $6,019 0.92593 Second Payment $7,350 $6,301 0.85734 2. Third Payment $9,200 $6,762 0.73503 Fourth Payment $10,650 $6,711 0.63017 6