Answer:
Explanation:
To calculate how much Flounder paid for the bonds, we need to use the present value formula for a bond:
PV = C/(1+r)^1 + C/(1+r)^2 + ... + C/(1+r)^n + F/(1+r)^n
where PV is the present value, C is the annual coupon payment, r is the yield, n is the number of years, and F is the face value.
In this case, Flounder purchased 325 bonds with a face value of $1000 each, so the total face value of the bonds is:
325 * $1000 = $325,000
The coupon rate is 11%, which means that the annual coupon payment is:
0.11 * $1000 = $110
The bonds mature in 10 years, so n = 10. The yield is also 11%, so r = 0.11.
Using these values, we can calculate the present value of the bond:
PV = $110/(1+0.11)^1 + $110/(1+0.11)^2 + ... + $110/(1+0.11)^10 + $1000/(1+0.11)^10
PV = $110/(1.11)^1 + $110/(1.11)^2 + ... + $110/(1.11)^10 + $1000/(1.11)^10
PV = $110/1.11 + $110/(1.11)^2 + ... + $110/(1.11)^10 + $1000/(1.11)^10
PV = $110*(1-(1.11)^-10)/0.11 + $1000/(1.11)^10
PV = $750.98 + $314.23
PV = $1,065.21
Therefore, Flounder paid $1,065.21 for the 325 bonds of Walters Inc.