Jimenez Enterprises issued 9%, 9-year, $2,554,800 par value bonds that pay inter

Question

Jimenez Enterprises issued 9%, 9-year, $2,554,800 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2014, and are issued on that date. The discount rate of interest for such bonds on April 1, 2014, is 10%.

Click here to view the factor table.

(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

What cash proceeds did Jimenez receive from issuance of the bonds? (Round answer to 0 decimal places, e.g. 125.)

Explanation / Answer

SEMIANNUAL COUPON AMOUNT = (2554800*9%)/2

= $114966

SEMI-ANNUAL DISCOUNT RATE = 10/2 = 5%

NO OF SEMI-ANNUAL PERIODS = 8*2 = 16

PRESENT VALUE OF THESE BONDS = COUPON AMOUNT*PVIFA(5%,16) + REDEMPTION AMOUNT*PVIF(5%,16)

= 114966*10.8378 + 2554800*0.4581

= $2416332.40

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