Question

Kelly Industries issued 11% bonds, dated January 1, with a face value of $140,000 on January 1, 2021. The bonds mature in 2031 (10 years). Interest is paid semiannually on June 30 and December 31. For bonds of similar risk and maturity the market yield is 12%. What was the issue price of the bonds

Answer 1

$131,971.06

Step-by-step explanation:

Using a financial calculator, the bond issue price can be determined by first of all set the calculator to its end mode before making the following inputs:

N=20(number of semiannual periods in 10 years=10*2=20)

PMT=7700 (semiannual coupon=face value*coupon rate/2= $140,000*11%/2)

I/Y=6(semiannual yield=12%/2=6%)

FV=140000(the bond's face value is $140,000)

CPT

PV=$131,971.06