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A company issued 9%, 15-year bonds with a face amount of $70 million. The market yield for bonds of similar risk and maturity is 9%. Interest is paid semiannually. At what price did the bonds sell

Sagot :

anthougo

The price at which the bonds were sold was $70 million because they were not sold below or above the par value.

How is the price of bonds determined?

The price of bonds can be determined by calculating the present value of the periodic interest payments (based on the coupon rate) over the bonds' maturity period and then discounting the payments at the market interest rate.

In this case, we used an online finance calculator to determine the present value of the interest payments as follows:

Data and Calculations:

N (# of periods) = 30 (15 years x 2)

I/Y (Interest per year) = 9%

PMT (Periodic Payment) = $3.15 million ($70 million x 9%)

FV (Future Value) = $70 million

Results:

PV = $70,000,000.00

Sum of all periodic payments = $94,500,000.00 ($3.15 million x 30)

Total Interest = $94,500,000.00 ($3.15 million x 30)

Thus, the price at which the bonds are issued is $70 million.

Learn more about bonds issuance at https://brainly.com/question/25596583

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