Question

Windsor Corporation issues $570,000 of 9% bonds, due in 10 years, with interest payable semiannually. At...

Windsor Corporation issues $570,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%.

Compute the issue price of the bonds.

(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Issue price of the bonds $enter the issue price of the bonds rounded to 0 decimal places

Homework Answers

Answer #1

Answer -$534,483

Annual Rate Applicable Rate
Market rate 10% 5%
Coupon Rate 9% 5%
Face Value $          570,000.00
Term 10 years
No of Int Payament 20
Present Value of Principal             PVF(5%,20) 570000*.37689 $      214,827.30
Present Value of Interest   PVAF (4.5%,20) (570000*4.5%)* 12.46221 $      319,655.69
Issue Price of Bonds $            534,483
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