On December 31, 2016, Interlink Communications issued 6% stated rate bonds with

Question

On December 31, 2016, Interlink Communications issued 6% stated rate bonds with a face amount of S100 million. The bonds mature on December 31, 2046. Interest is payable annually on each December 31, beginning in 2017. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Determine the price of the bonds on December 31, 2016, assuming that the market rate of interest for similar bonds was 7%. Table values are based on: Cash Flow Interest Principal Amount Present Value Price of bonds

Explanation / Answer

Calculate price of bonds :

Table values are based on n = 30 i = 7% Cash flow Amount Present value Interest 6000000 74454240 Principal 100000000 13137000 Price of bonds 87591240

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