On June 30, 2016, Singleton Computers issued 7% stated rate bonds with a face am
ID: 2421253 • Letter: O
Question
On June 30, 2016, Singleton Computers issued 7% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2031 (15 years). The market rate of interest for similar bond issues was 6% (3.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on December 31, 2016. (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 June 30, 2016.
Table values are based on:
n = ? i = ?
Cash flow Amount Present Value
Interest ? ?
Principal ? ?
Price of bonds $ ?
2. Calcualte the interest expense Singleton repots in 2016 for these bonds using the effective interest method.
Period End Cash interest paid Bond interest expnese Premium Amortization CarryingValue
06/30/2016 ?
12/31/2016 ? ?
On June 30, 2016, Singleton Computers issued 7% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2031 (15 years). The market rate of interest for similar bond issues was 6% (3.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on December 31, 2016. (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
1)n= 15*2 = 30
i = 3%
200*3.5%= 7,000,000
7,000,000*19.60044
Price of bonds $219,601,080
2)
1)n= 15*2 = 30
i = 3%
Cash flow Amount PV Interest200*3.5%= 7,000,000
7,000,000*19.60044
$137,203,080 Principal 200M*.41199 82,398,000Price of bonds $219,601,080
2)
Period Cash interest 3.5% Bond interest expense 3% Premium amotisation Carrying value 6/30/2016 219,601,080 12/31/2016 7,000,000 6,588,032 411,968 219,189,112Related Questions
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