Trew Company plans to issue bonds with a face value of $909,500 and a coupon rat

Question

Trew Company plans to issue bonds with a face value of $909,500 and a coupon rate of 6 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. (FV of $1 PV of $1 FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answers to nearest whole dollar amount.) Determine the issuance price of the bonds assuming an annual market rate of interest of 8.0 percent. Issuance price References eBook & Resources Worksheet Difficulty: 1 Easy Learning Objective: 10-04 Report bonds payable and interest expense for bond securities issued at a discount

Explanation / Answer

semiannual interest : 909500.06*6/12=27285

semiannual months =10*2 =20

semiannual yield = 8*6/12 =4%

Issuance price =[PVA 4%,20*Interest ]+[PVF 4%,20*Face value]

=[13.59033*27285]+ [.45639*909500]

= 370812.15+ 415086.71

= $ 785898.86 [rounded to 785,899]

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.