Pages

Thursday, 24 May 2012

A company issued 7%, 9year bonds with a face amount of $84 million. The market yield for bonds of similar risk and maturity is 8%. Interest is paid semiannually.


A company issued 7%, 9year
bonds with a face amount of $84 million. The market yield for bonds of
similar risk and maturity is 8%. Interest is paid semiannually.
Use (Table 2) and (Table 4)
At what price did the bonds sell? (Enter your answer in dollars not in millions. Round "PV Factor" to
5 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your
response.)
Price of the bonds $ 78,683,262 ± 0.01%

Explanation:

Interest $ 2,940,000 ¥ × 12.65930* = $37,218,342
Principal $84,000,000 × 0.49363** = 41,464,920
Present value (price) of the bonds $ 78,683,262
¥ [7 ÷ 2] % × $84,000,000
* present value of an ordinary annuity of $1: n = 18, i = 4.0%. (Table 4)
** present value of $1: n = 18, i = 4.0%. (Table 2)

No comments:

Post a Comment