On January 1, 2018, Frontier World issues $40.3 million of 8% bonds, due in 15 y

Question

On January 1, 2018, Frontier World issues $40.3 million of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride.

so to get the issue price, i did (face amount) 40300000 X (pv of $1, 15 years at 4.5%) which was .51672 = 20823816. Then I did (interest payment) 1612000 X (pva of $1, 15 years at 4.5%) which was 10.73955 = 17312154.6. Then i added 20823816 + 17312154.6 and got 38135970 but it says its wrong so I'm not sure if what I did was right. Explanations would be great, thanks in advance!

3 . If the market rate is 9%, calculate the issue price. F o 51 PV of $1 FVA of $1, and PVA of $1 answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.) Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your Answer is complete but not entirely correct. Bond Characteristics Face amount Interest payment Market interest rate Periods to maturity Issue price 40,300,000 4.5% o 30 38,135,9718 3-b. The bonds will issue at OOA Discount A Premium Face amount

Explanation / Answer

Issue price of bonds = Present value of interest+Present value of maturity

= (40300000*4%*16.28889)+(40300000*0.26700)

Issue price of bonds = 37017791

3b) A discount

Face amount 40300000 Interest payment 1612000 Market interest rate 4.5% Period to maturity 30 Issue price 37017791

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

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