James Corporation is planning to issue $518,000 worth of bonds that mature in 10
ID: 2460474 • Letter: J
Question
James Corporation is planning to issue $518,000 worth of bonds that mature in 10 years and pay 6 percent interest each June 30 and December 31. All of the bonds will be sold on January 1, 2014. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Required: Compute the issue (sale) price on January 1, 2014, for each of the following independent cases: a. Case A: Market (yield) rate, 4 percent. b. Case B: Market (yield) rate, 6 percent. c. Case C: Market (yield) rate, 8 percent.
Explanation / Answer
Case A : 15,540 x PVAi= 2%, n=20 + 518,000 x PVi=2%,n=20 = 15,540 x 16.352 + 518,000 x 0.673 = 254,110 + 348,614
= $ 602,724
Case B: 15,540 x PVAi=3%,n=20 + 518,000 x PVi=3%, n=20 = 15,540 x 14.878 + 518,000 x 0.554 = 231,204 + 286,972 = $ 518,000
Case C: 15,540 x PVAi=4%, n=20 + 518,000 x PVi=4%, n=20 = 15,540 x 13.590 + 518,000 x 0.456 = 211,189 + 236,208 = $ 447,397
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.