Question

On September 30, 2018, the San Fillipo Corporation issued 8%
stated rate bonds with a face amount of $220 million. The bonds
mature on September 30, 2038 (20 years). The market rate of
interest for similar bonds was 10%. Interest is paid semiannually
on March 31 and September 30. ((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 on September 30, 2018.
**(Enter your answers in whole dollars. Round your final
answers to nearest whole dollar amount.)**

Answer #1

(note there will be slight difference in issue price calculation ,kindly use the factors as given | |||||||

inn your question to get exact answer) | |||||||

Bond characterstics | Amount | ||||||

1-a) | Principal | 220,000,000 | |||||

interest | 8,800,000 | ||||||

Market interest rate | 5% | ||||||

periods to maturity | 40 | ||||||

issue price | 182,250,992 | ||||||

Calculation of bond issue price | |||||||

Where | |||||||

i= | 5.00% | ||||||

t= | 40 | ||||||

principal | * | PV of $1 at 5% for 40 yrs = | |||||

220,000,000 | * | 0.14205 | = | 31251000 | |||

interest | * | PV of ordinary annuity at 5%= | |||||

8800000 | * | 17.15909 | = | 150999992 | |||

bond issue price | 182250992 |

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