Ask Question
2 July, 16:33

James Corporation is planning to issue bonds with a face value of $505,500 and a coupon rate of 6 percent. The bonds mature in 7 years and pay interest semiannually every June 30 and December 31. All of the bonds will be sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor (s) from the tables provided. Round your final answer to whole dollars.)

Compute the issue (sale) price on January 1 of this year for each of the following independent cases:

Case A: Market interest rate (annual) : 4 percent.

Case B: Market interest rate (annual) : 6 percent.

Case C: Market interest rate (annual) : 8.5 percent.

+1
Answers (1)
  1. 2 July, 19:50
    0
    4%=$566,697.09

    6%=$505,500

    8.5%=$ 439,842.50

    Explanation:

    The issue price of the bond can be computed using the pv formula in excel spreadsheet as below:

    =-pv (rate, nper, pmt, fv)

    the rate is the market of 4% divided by 2

    nper is the number of semiannual interest the bonds would pay which is 7 years multiplied by 2 i. e 14

    pmt is the semiannual coupon interest on the bond, which is $505,500*6%*6/12=$15165

    fv is the face value repayable on redemption which is $505,500

    for market rate of 4%

    =-pv (2%,14,15165,505500) = $566,697.09

    for market rate of 6%

    =-pv (3%,14,15165,505500) = $ 505,500.00

    for market interest of 8.5%

    =-pv (4.25%,14,15165,505500) = $ 439,842.50
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “James Corporation is planning to issue bonds with a face value of $505,500 and a coupon rate of 6 percent. The bonds mature in 7 years and ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers