Question
Exercise 9-90 (Algorithmic) (Appendix 9A) Calculating Bond Issue Price On January 1, 2020, University Theatres issued...
Answers
Bond face value = $461,000
Stated rate = 8%
Interest paid semi annually = $461,000 * 8% *6/12 = $18,440
tenure of bond (in years) = 15
tenure of bond (in periods) = 30
a) Market rate of interest = 6%
Market rate of interest = 6%/ 2 = 3% per period
Bond issue price = Face value* PV + Interest amount * PVA
Bond issue price = 461,000 * PV(3%,30) + 18,440 * PVA(3%,30)
Bond issue price = (461,000 * 0.41199) + (18,440 * 19.60044)
Bond issue price = $551,359.50
Bond issue price = $551,360
a) Market rate of interest = 10%
Market rate of interest = 10%/ 2 = 5% per period
Bond issue price = Face value* PV + Interest amount * PVA
Bond issue price = 461,000 * PV(5%,30) + 18,440 * PVA(5%,30)
Bond issue price = (461,000 * 0.23138) + (18,440 * 15.37245)
Bond issue price = $390,134.158
Bond issue price = $390,134