On June 30, 2018, Singleton Computers issued 7% stated rate bonds with a face am

Question

On June 30, 2018, Singleton Computers issued 7% stated rate bonds with a face amount of $200 million. The bonds mature on June 30. 2033 (15 years). The market rate of interest for similar bond issues was 6% (3.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on December 31,2018. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD o $1) (Use appropriate factor(s) from the tablos provided.) Required 1. Determine the price of the bonds on June 30, 2018. 2. Calculate the interest expense Singleton reports in 2018 for these bonds using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price of the bonds on June 30, 2018. (Enter your answers in whole dollars. Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount.) Table values are based on: n a Cash Flow Amount Present Value Interest Principal Price of bonds Required 1 Required 2 >

Explanation / Answer

SOLUTION

(A) n = 30, i =3%

Present value of an ordinary annuity of $1 :n= 30 , i= 3.0% =  19.60044

Present value of $1:n= 30,i= 3.0% =  0.41199

(B)

Cash Flow Amount ($) Present value ($) Interest 7,000,000 137,203,080 Principal 200,000,000 82,398,000 Price of bonds 219,601,080

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