Brief Exercise G-14 Your answer is incorrect. Try again. Carla Vista Co. is abou

Question

Brief Exercise G-14 Your answer is incorrect. Try again. Carla Vista Co. is about to issue $315,300 of 10-year bonds paying an 10% interest rate, with interest payable semiannually. The discount rate for such securities is 12%. Click here to view the factor table For calculation purposes, use 5 decimal places as displayed in the factor table provided.) How much can Carla Vista expect to receive for the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,525.) Carla Vista can expect to receive

Explanation / Answer

Face Value = $315,300

Annual Coupon Rate = 10%
Semi-annual Coupon Rate = 5%
Semi-annual Coupon = 5%*$315,300 = $15,765

Annual Interest Rate = 12%
Semi-annual Interest Rate = 6%
Semi-annual Period to Maturity = 20

Proceed from Issue of Bonds = $15,765 * PVIFA(6%, 20) + $315,300 * PVIF(6%, 20)
Proceed from Issue of Bonds = $15,765 * (1 - (1/1.06)^20) / 0.06 + $315,300 / 1.06^20
Proceed from Issue of Bonds = $15,765 * 11.46992 + $315,300 * 0.31180
Proceed from Issue of Bonds = $279,134

So, Caria Vista can expect to receive $279,134 from the issue of Bonds

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