Question

On January 1, 2018, Shirley Corporation purchased 12% bonds dated January 1, 2018, with a face...

On January 1, 2018, Shirley Corporation purchased 12% bonds dated January 1, 2018, with a face amount of $24 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 16%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the price of the bonds at January 1, 2018. (Enter your answer in whole dollars.)

Homework Answers

Answer #1
Period Cash flows Discount factor @8% Present value
0 1 0
1 1440000 0.925925926 1333333
2 1440000 0.85733882 1234568
3 1440000 0.793832241 1143118
4 1440000 0.735029853 1058443
5 1440000 0.680583197 980039.8
6 1440000 0.630169627 907444.3
7 1440000 0.583490395 840226.2
8 1440000 0.540268885 777987.2
9 1440000 0.500248967 720358.5
10 1440000 0.463193488 666998.6
11 1440000 0.428882859 617591.3
12 1440000 0.397113759 571843.8
13 1440000 0.367697925 529485
14 1440000 0.340461041 490263.9
15 1440000 0.315241705 453948.1
16 1440000 0.291890468 420322.3
17 1440000 0.270268951 389187.3
18 1440000 0.250249029 360358.6
19 1440000 0.231712064 333665.4
20 1440000 0.214548207 308949.4
20 24000000 0.214548207 5149157

19287289

Interest ( semi annual) = 24000000*12%/2=1440000

Therefore price of the bond is 19287289

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