QS 14-5A Computing bond price LO C2 Garcia Company issues 700%, 15-year bonds wi

ID: 2403551 • Letter: Q

Question

QS 14-5A Computing bond price LO C2 Garcia Company issues 700%, 15-year bonds with a par value of$360,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 6.00%, which implies a selling price of 109 719. Confirm that the bonds selling price is approximately correct. Use present value Iable B1 and Table B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table velues in calculations. Round your other final answers to nearest whole doller amount.) ar Value PriceSelling Pr 360,000 1097/9395,172 Present Value = $ Table Value ash Flow $360,000 par (maturity) value $12,600 interest payment Price of Bond Difference due to rounding of table values 395,172

Explanation / Answer

Par Value

X Price

Selling Price

$360,000

109 7/9

$395,172

Cash Flow

x Table Value

Present Value

Par Value, $360,000

0.4120

$148,320

Interest Payment, $12,600

19.5995

$ 246,954

Price Bond

$395,274

Yes, The Company’s Bond Pricing is approximately correct, There is only a difference of $102 [$395,274 – 395,172] which may be due to rounding of the table value. The Pricing of Bond is approximately correct