On January 1, 2015, Frontier world issues $40.4 million of 9% bonds, due in 20 y

Question

On January 1, 2015, Frontier world issues $40.4 million of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride value: 10.00 points 1-a. If the market rate is 8%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.) Bond Characterlstics Amount $ 40,400,000 Interest payment Market interest rate Periods to maturity Issue price

Explanation / Answer

1-a Bond Amount Face Value 4,04,00,000 Interest Payment 1818000 semiannual Market interest rate 4% semiannual Periods to maturity 40 Issue price 4,43,98,140.32 2-a Bond Amount Face Value 4,04,00,000 Interest Payment 1818000 semiannual Market interest rate 4.5% semiannual Periods to maturity 40 Issue price 4,04,00,000 2-b Face value If bond interest rate is equal to coupon rate its issued at facevalue 3-a Bond Amount Face Value 4,04,00,000 Interest Payment 1818000 semiannual Market interest rate 5% semiannual Periods to maturity 40 Issue price 3,69,33,864.56 3-b Discount as it market value is les than facevalue

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