Neukoellen Company issued six year bonds on January 1. The fave value of the bon
ID: 2499973 • Letter: N
Question
Neukoellen Company issued six year bonds on January 1. The fave value of the bonds $125000. The stated interest rate on the bonds is 10%. The market rate of interest at the time of issuance was 8%. The bonds pay interest semi annually. Calculate the issuance of the bonds. Neukoellen Company issued six year bonds on January 1. The fave value of the bonds $125000. The stated interest rate on the bonds is 10%. The market rate of interest at the time of issuance was 8%. The bonds pay interest semi annually. Calculate the issuance of the bonds.Explanation / Answer
Neukoellen Company Face value of Bond 125,000.00 Stated interest rate 10% Market interest rate 8% Maturity years 6.00 Half yearly market rate 4% Half yearly interest amt 6,250 Periods (half years) Interest +Maturity Amt Discount factor @4% PV of Cash flows 1 6,250 0.9615 6,009.62 2 6,250 0.9246 5,778.48 3 6,250 0.8890 5,556.23 4 6,250 0.8548 5,342.53 5 6,250 0.8219 5,137.04 6 6,250 0.7903 4,939.47 7 6,250 0.7599 4,749.49 8 6,250 0.7307 4,566.81 9 6,250 0.7026 4,391.17 10 6,250 0.6756 4,222.28 11 6,250 0.6496 4,059.88 12 131,250 0.6246 81,978.36 Total 136,731.34 So Issue price of Bond = $ 136,731.34
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