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Issue Price The following terms relate to independent bond issues: 530 bonds; $1,000 face value; 8% stated...

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Accounting

Issue Price

The following terms relate to independent bond issues:

  1. 530 bonds; $1,000 face value; 8% stated rate; 5 years; annualinterest payments
  2. 530 bonds; $1,000 face value; 8% stated rate; 5 years;semiannual interest payments
  3. 900 bonds; $1,000 face value; 8% stated rate; 10 years;semiannual interest payments
  4. 2,160 bonds; $500 face value; 12% stated rate; 15 years;semiannual interest payments

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

Required:

Assuming the market rate of interest is 10%, calculate theselling price for each bond issue. If required, round yourintermediate calculations and final answers to the nearestdollar.

SituationSelling Price of the Bond Issue
a.$
b.$
c.$
d.$

Answer & Explanation Solved by verified expert
4.5 Ratings (869 Votes)

Selling price for each bond issue is as calculated below:

a.

Table value are based on:
n= 5
i= 10%
Cash Flow Table Value Amount Present Value
Par (maturity value) 0.6209 530,000 329,088
Interest (annuity) 3.7908 42,400 160,729
Issue Price 489,818

b.

Table value are based on:
n= 10
i= 5%
Cash Flow Table Value Amount Present Value
Par (maturity value) 0.6139 530,000 325,374
Interest (annuity) 7.7217 21,200 163,701
Issue Price 489,075

c.

Table value are based on:
n= 20
i= 5%
Cash Flow Table Value Amount Present Value
Par (maturity value) 0.3769 530,000 199,751
Interest (annuity) 12.4622 21,200 264,199
Issue Price 463,950

d.

Table value are based on:
n= 30
i= 5%
Cash Flow Table Value Amount Present Value
Par (maturity value) 0.2314 530,000 122,630
Interest (annuity) 15.3725 31,800 488,844
Issue Price 611,474

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