[The following information applies to the questions displayed below.] On January

Question

[The following information applies to the questions displayed below.]
    

On January 1, 2014, TCU Utilities issued $1,017,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 12 percent. The company uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

What was the issue price on January 1, 2014?

On January 1, 2014, TCU Utilities issued $1,017,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 8 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of interest was 12 percent. The company uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

What was the issue price on January 1, 2014?

Explanation / Answer

Present Value of cash flows 8,67,295.83 Year 1        40,680.00 0.943396      38,377.36 Year 2        40,680.00 0.889996      36,205.06 Year 3        40,680.00 0.839619      34,155.71 Year 4        40,680.00 0.792094      32,222.37 Year 5        40,680.00 0.747258      30,398.46 Year 6        40,680.00 0.704961      28,677.79 Year 7        40,680.00 0.665057      27,054.52 Year 8        40,680.00 0.627412      25,523.14 Year 9        40,680.00 0.591898      24,078.43 Year 10 10,57,680.00 0.558395 5,90,602.99 8,67,295.83

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.