Question

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

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