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Stallion Corporation sold $100,000 par value, 10-year first mortgage bonds to Pony Corporation on January 1, 20X5. The bonds, which bear a nominal interest rate of 12 percent, pay interest semiannually on January 1 and July 1. The current market interest rate is 11 percent. Pony Corporation owns 65 percent of the voting stock of Stallion Corporation, and consolidated statements are prepared on December 31, 20X7. Required: a. What was the original purchase price of the bonds to Pony Corporation? (Round your answer to 2 decimal places.) b. What is the balance in Ponys bond investment account on December 31, 20X7? (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.)

For (a)

Please explain why we have 106000 in the last row for the calculation of the price of bond. I have trouble understand that part.

Calculate original purchase price of bond as follows: Price of bond = PV of par value + PV of interest payments A B D 1 Period Discount factorCash flow PV of cash outflow 2 1 $0.9479 6000 $5,687.20 3 2 $0.8985 6000 $5,390.71 4 3 S0.8516 6000 $5,109.68 5 4 $0.8072 6000 $4,843.30 6 5 $0.7651 6000 $4,590.81 7 6 $0.7252 6000 $4,351.47 8 7 $0.6874 6000 $4,124.62 9 8 $0.6516 6000 $3,909.59 10 9 $0.6176 6000 $3,705.78 11 10 $0.5854 6000 $3,512.58 11 $0.5549 6000 $3,329.46 13 12 $0.5260 6000 $3,155.89 14 13 S0.4986 6000 $2,991.36 15 14 $0.4726 6000 $2,835.42 16 15 S0.4479 6000 $2,687.60 16 $0.4246 6000 $2,547.49 17 $0.4024 6000 $2,414.68 19 18 $0.3815 6000 $2,288.80 20 19 $0.3616 6000 $2,169.47 20 $0.3427 106000 $36,329.27 22 Price of Bond $105,975.19 12 17 18 21

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