QS 14-5A Computing bond price LO C2 Garcia Company issues 12.00%, 15-year bonds

Question

QS 14-5A Computing bond price LO C2 Garcia Company issues 12.00%, 15-year bonds with a par value of $410,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10.00%, which implies a selling price of 115 113. Confirm that the bonds' selling price is approximately correct. Use present value Table B.1 and Table B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table values in calculations. Round your other final answers to nearest whole dollar amount.) Par Value Selling Price - $ 472,935 Present Value x Price 10,000115 1/3 Table Value Cash Flovw $410,000 par (maturity) value $24,600 interest payment Price of Bond Difference due to rounding of table values

Explanation / Answer

Par value * price Selling price $410,000 115.33 472853 cash flows Table value Present value $ 410000 par value 0.2314 94874 $ 24600 Interest payment 15.3725 378163.5 Price of Bonds 473037 Difference due to rounding of table value 184

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