The following information applies to the questions displayed belowj On January 1

Question

The following information applies to the questions displayed belowj On January 1, 2018, Frontier World issues $40.7 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. value: Required informatlon 10.00 points Required 1-a. If the market rate is 8%, calculate the issue price (F ? 1, 0 1 E A ofs and AOf use appropriate actor s from the table round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.) ro idea o no Bond Characteristics Amount Face amount Interest payment Market interest rate Periods to maturity Issue price $ 40,700,000 $ 1,831,500 4.0% 40

Explanation / Answer

5)

Principal 40,700,000 interest 1831500 Market interest rate 4% periods to maturity 40 issue price    44,727,861 Calculation of bond issue price Where i= 4.00% t= 40% principal * PV of $1 at 4% for 40 yrs = 40,700,000 * 0.20829        =          8,477,403 interest * PV of ordinary annuity at 4%= 1831500 * 19.79277 =        36,250,458 bond issue price        44,727,861

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