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.)
(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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