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Scottie Adams Bird Supplies issued 15% bonds, dated January 1, with a face amount of $310,000 on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest is paid semiannually on June 30 and December 31. What is the price of the bonds at January 1, 2021

Sagot :

Tundexi

Answer:

a. $326,421.

Explanation:

Missing word "Some relevant and irrelevant present value factors:

* PV of annuity due of $1: n = 20; i = 7% is 11.33559

* PV of ordinary annuity of $1: n = 20; i = 7% is 10.59401

**PV of $1: n = 20; i = 7% is 0.25842

Multiple Choice $326,421. $361,100. $572,732. $292,814."

Semi annual cash interest = 23250 (310,000*15%*6/12)

n = 20      

I =7%

Cashflows                              Amount       PVF        Present value

Semi annual cash interest   23250      10.59401      246,310.70

Maturity value                       310,000    0.25842      80,110.20

Price of bonds                                                           $326,420.90

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