A company issued 6%, 15-year bonds with a face amount of $97 million. The market

Question

A company issued 6%, 15-year bonds with a face amount of $97 million. The market yield for bonds of similar risk and maturity is 6%. Interest is paid semiannually. At what price did the bonds sell? (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. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

A company issued 6%, 15-year bonds with a face amount of $97 million. The market yield for bonds of similar risk and maturity is 6%. Interest is paid semiannually. At what price did the bonds sell? (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. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Explanation / Answer

Coupon payment       = 97000000 * 6% = 5820000

Market value of bond = Coupon amount * PVIF ( 15years , 6%) + face value * PVIF ( 15years , 6%)

                                      = 5820000 * 9.712249 + 10000000 * 0.417265

                                      = 56525289 + 4172650

                                      = 60697940

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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