Question
Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...
Bond Premium, Entries for Bonds Payable Transactions
Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $83,900,000 of 10-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $95,302,555. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Compute the price of $95,302,555 received for the bonds by using Table 1, Table 2, Table 3 and Table 4. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.
| Present value of the face amount | $ |
| Present value of the semiannual interest payments | $ |
| Price received for the bonds | $ |
Please fill in the blanks. Thanks!
Homework Answers
Answer #1
Answer -
Face Value = $83,900,000
Semiannual Coupon = $4,195,000
Semiannual Period to Maturity = 20
Annual Market Rate of Interest = 8%
Semiannual Market Rate of Interest = 4%
Present Value of the Face Amount = $83,900,000 * PV of $1 (4%,
20)
Present Value of the Face Amount = $83,900,000 * 0.45639
Present Value of the Face Amount = $38,291,121
Present Value of the Semi-annual Interest Payments = $4,195,000
* PVA of $1 (4%, 20)
Present Value of the Semi-annual Interest Payments = $4,195,000 *
13.59033
Present Value of the Semi-annual Interest Payments =
$57,011,434
Present value of the face amount $38,291,121
Present value of the semi-annual
interest payments $57,011,434
Price received for the bonds $95,302,555
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