E10-4 Computing Issue Prices of Bonds Sold at Par, at a Discount, and at a Premi
ID: 2513183 • Letter: E
Question
E10-4 Computing Issue Prices of Bonds Sold at Par, at a Discount, and at a Premium LO10-2, 10-4, 10-5 James Corporation is planning to issue bonds with a face value of $500,000 and a coupon rate of 6 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bondsl be sold on January 1 of this year. (FV of S1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.) Required: Compute the issue (sale) price on January 1 of this year for each of the following independent cases: a. Case A: Market interest rate (annual): 4 percent. b. Case B: Market interest rate (annual): 6 percent. c. Case C: Market interest rate (annual): 8.5 percent.Explanation / Answer
Case A Case B Case B Face Value $500,000 Face Value $500,000 Face Value $500,000 Annual Coupon rate 6% Annual Coupon rate 6% Annual Coupon rate 6% Market Interest rate 4% Market Interest rate 6% Market Interest rate 8.50% Years to Maturity 10 Years to Maturity 10 Years to Maturity 10 Payment Frequency 2 Payment Frequency 2 Payment Frequency 2 Value of bond $581,765.00 Value of bond $522,265.00 Value of bond $416,910.00 Value of Bond = c*F*1-(1+r)-t/r+ F/(1+r)t C= Bond Interest rate, F= Face Value, r=Market interest rate, t=Time
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.