On December 31, 2016, Interlink Communications issued 4% stated rate bonds with
ID: 2418229 • Letter: O
Question
On December 31, 2016, Interlink Communications issued 4% stated rate bonds with a face amount of $116 million. The bonds mature on December 31, 2046. Interest is payable annually on each December 31, beginning in 2017. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Determine the price of the bonds on December 31, 2016, assuming that the market rate of interest for similar bonds was 5%.
On December 31, 2016, Interlink Communications issued 4% stated rate bonds with a face amount of $116 million. The bonds mature on December 31, 2046. Interest is payable annually on each December 31, beginning in 2017. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Explanation / Answer
Answer:
Price=$4.64*(PVIFA5%,30)+$116*(PVIF5%,30)
=$71.3284+$26.84
=$98.17 million
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