James Corporation is planning to issue bonds with a face value of $504,500 and a

Question

James Corporation is planning to issue bonds with a face value of $504,500 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 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.

b. Case B: Market interest rate (annual): 6 percent.

c. Case C: Market interest rate (annual): 8.5 percent.

Explanation / Answer

a Amount PV factor Present value Semi-annual interest 15135 16.35143 247479 Principal 504500 0.67297 339513 Issue price 586992 b Issue price = 504500 c Amount PV factor Present value Semi-annual interest 15135 13.29437 201210 Principal 504500 0.43499 219452 Issue price 420663 Note: Final answer might vary +1

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