James Corporation is planning to issue bonds with a face value of $503,500 and a

Question

James Corporation is planning to issue bonds with a face value of $503,500 and a coupon rate of 6 percent. The bonds mature in 15 years and pay interest semiannually every June 30 and December 31. All of the bonds will be 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.) 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. ssue price b. Case B: Market interest rate (annual): 6 percent. Issue price $ 503,500 c. Case C: Market interest rate (annual): 8.5 percent. Issue price

Explanation / Answer

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

Case A Case B Case B Face Value $503,500 Face Value $503,500 Face Value $503,500 Annual Coupon rate 6% Annual Coupon rate 6% Annual Coupon rate 6% Market Interest rate 4% Market Interest rate 6% Market Interest rate 8.5% Years to Maturity 15 Years to Maturity 15 Years to Maturity 15 Payment Frequency 2 Payment Frequency 2 Payment Frequency 2 Value of bond $616,266.15 Value of bond $503,500.00 Value of bond $397,897.06

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