LaTanya Corporation is planning to issue $110, 000, ten-year, 9percent bonds. In
ID: 2741282 • Letter: L
Question
LaTanya Corporation is planning to issue $110, 000, ten-year, 9percent bonds. Interest is payable each December 31. All of the bonds will be sold on January 1, 2014. (FV of $1, PV of $1. FVA of $1. and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Required: Compute the issue (sale) price on January 1, 2014, for each of the following independent cases: Case A: Market (yield) rate, 9 percent. Case B: Market (yield) rate, 7 percent Case C: Market (yield) rate, 11 percent. 2.) James Corporation is planning to issue $515, 000 worth of 8 percent bonds that mature in 3 years. Interest payments are made each June 30 and December 31. All of the bonds will be sold on January 1, 2014. (FV of $1. PV of $1. FVA of$1. and PVA of$1) (Use the appropriate factor(s)from the tables provided.) Case A: Market (yield) rate, 6 percent. Case B: Market (yield) rate, 8 percent Case C: Market (yield) rate, 10 percent G MAC Corporation issued a $108, 000 bond that matures in ten years. The bond has a stated interest rate of 8 percent. On January 1, 2014, when the bond was issued, the market rate was 10 percent. The bond pays interest twice per year, on June 30 and December 31. (FV of $1. PV of $1. FVA of $1. and PVA of $1) (Use the appropriate factor(s)from the tables provided.) At what price was the bond issued?Explanation / Answer
1.
n = 10years
coupon = 9%
Case A - yield 9%
Issue price = 110000*1000 = 110000000
Case B - 7%
Issue price = 110000*1140.47 =
Case C - 11%
Issue price = 110000 8882.215 = 97043690
Question 2:
n = 3*2 (semi-annual) = 6
Coupon = 0.08/2 = 0.04
Case A - 6%
No. of bonds = 515000/1054.17 = 489 (rounded)
Case B - 8%
No. of shares = 515000/1000 = 515
Case C - 10%
No. of shares = 515000/949.24 = 543
Question 3:
Bond issue price is the present value
Yield 0.09 Year Cashflow (x) Discount rate = 1/(1+0.09)^n Present Value 1 90 0.91743119 82.5688073 2 90 0.84167999 75.7511994 3 90 0.77218348 69.4965132 4 90 0.70842521 63.758269 5 90 0.64993139 58.4938248 6 90 0.59626733 53.6640594 7 90 0.54703424 49.233082 8 90 0.50186628 45.1679652 9 90 0.46042778 41.4385002 10 1090 0.42241081 460.42778 Present value 1000Related Questions
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