QS 14-5A Computing bond price LO C2 Garcia Company issues 6.00%, 15-year bonds w

Question

QS 14-5A Computing bond price LO C2 Garcia Company issues 6.00%, 15-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 4.00%, which implies a selling price of 122 1/3. Confirm that the bonds, selling price is approximately correct. Use present value Table B1 and Table B3n Appendix B. Round all table values to 4 decimal places, and use the rounded table values in calculations. Round your other final answers to nearest whole dollar amount.) Par Value Selling Price x Price 122 1/3 Table Value 250,000 -$ 305,875 Cash Flow $250,000 par (maturity) value $7,500 interest payment Price of Bond Difference due to rounding of table values Present Value $305,875

Explanation / Answer

Par value Price Selling price 250000 122 1/3 305875 Cash flow Table value Present value $250000 par maturity value 0.5521 138025 $7500 interest payment 22.3965 167974 Price of bond 305999 Difference due to rounding off 124

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