Determining the Proceeds from Bond Issues Madison Corporation is authorized to i
ID: 2548699 • Letter: D
Question
Determining the Proceeds from Bond Issues
Madison Corporation is authorized to issue $800,000 of 5-year bonds dated June 30, 2016, with a stated rate of interest of 11%. Interest on the bonds is payable semiannually, and the bonds are sold on June 30, 2016.
Required:
Determine the proceeds that the company will receive if it sells the following: (Click here to access the tables to use with this exercise and round your answers to two decimal places, if necessary.)
1. The bonds to yield 12% $ 2. The bonds to yield 10% $Explanation / Answer
1) In case of semi annual bond Par value= $800000 , Coupon payment= 800000*0.11/2= $44000, Years to maturity= 10 Yield=6% Statement showing Fair price: Particulars Time PVf @6% Amount PV Cash Flows (Interest) 1.00 0.9434 44,000.00 41,509.43 Cash Flows (Interest) 2.00 0.8900 44,000.00 39,159.84 Cash Flows (Interest) 3.00 0.8396 44,000.00 36,943.25 Cash Flows (Interest) 4.00 0.7921 44,000.00 34,852.12 Cash Flows (Interest) 5.00 0.7473 44,000.00 32,879.36 Cash Flows (Interest) 6.00 0.7050 44,000.00 31,018.26 Cash Flows (Interest) 7.00 0.6651 44,000.00 29,262.51 Cash Flows (Interest) 8.00 0.6274 44,000.00 27,606.14 Cash Flows (Interest) 9.00 0.5919 44,000.00 26,043.53 Cash Flows (Interest) 10.00 0.5584 44,000.00 24,569.37 Cash flows (Maturity Amount) 10.00 0.5584 8,00,000.00 4,46,720.00 Fair Price 7,70,563.83 Proceeds from bond issues is $77056.83 2) In case of semi annual bond Par value= $800000 , Coupon payment= 800000*0.11/2= $44000, Years to maturity= 10 Yield=5% Statement showing Fair price: Particulars Time PVf @5% Amount PV Cash Flows (Interest) 1.00 0.9524 44,000.00 41,904.76 Cash Flows (Interest) 2.00 0.9070 44,000.00 39,909.30 Cash Flows (Interest) 3.00 0.8638 44,000.00 38,008.85 Cash Flows (Interest) 4.00 0.8227 44,000.00 36,198.91 Cash Flows (Interest) 5.00 0.7835 44,000.00 34,475.15 Cash Flows (Interest) 6.00 0.7462 44,000.00 32,833.48 Cash Flows (Interest) 7.00 0.7107 44,000.00 31,269.98 Cash Flows (Interest) 8.00 0.6768 44,000.00 29,780.93 Cash Flows (Interest) 9.00 0.6446 44,000.00 28,362.79 Cash Flows (Interest) 10.00 0.6139 44,000.00 27,012.18 Cash flows (Maturity Amount) 10.00 0.6139 8,00,000.00 4,91,120.00 Fair Price 8,30,876.34 Proceeds from bond issues is $830876.34
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.