Question

Scottie Adams Bird Supplies issued 14% bonds, dated January 1, with a face amount of $140,000 on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31. What is the price of the bonds at January 1, 2021

Answer 1

$156,058

Step-by-step explanation:

Missing word "PV of annuity due of $1: n = 20; i = 6% is 12.15812 *PV of ordinary annuity of $1: n = 20; i = 6% is 11.46992 **PV of $1: n = 20; i = 6% is 0.31180"

n = 20, i = 6%

Periodic interest payments of the bonds = Face value of the bonds * Stated rate of interest * 6 months/12 months

= $140,000 * 14% * 6 months/12 months

= $9,800

Cash Flow Amount Table Value Present Value

Interest payments $9,800 11.46992 $112,405

Maturity Value $140,000 0.31180 $43,653

Issue Price of the bonds at January 1, 2021 $156,058