Williams Company plans to issue bonds with a face value of $605,500 and a coupon

Question

Williams Company plans to issue bonds with a face value of $605,500 and a coupon rate of 4 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. (FV of $1 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.) Determine the issuance price of the bonds assuming an annual market rate of interest of 4 percent. ssuance price References eBook & Resources Worksheet Difficulty: 1 Easy Learning Objective: 10-02 Report bonds payable and interest expense for bond securities issued at par

Explanation / Answer

Computation of Issuance Price of Bond Par Value of Bond $605,500.00 Coupon Interest Rate P.a. 4% Market Effective Interest Rate p.a. 4% Semiannual Market Interets   2.00% Annual Interest $24,220.00 Semiannual Interets $12,110.00 Maturity in 10 Year Period (10*2) 20 Cumm PVAF @2% for 20 8.111 Present Value of Interest Payment (a) $98,224.21 Present Value of Bond Par Value (b) 378437.5 ($605500*0.625) Present Value of Bond (a+b) $476,661.71 Hence issuance price of bond will be   $476662

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