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Karolina [17]
3 years ago
5

Mufala, Inc., will issue $10,000,000 of 6% 10-year bonds. The market rate for bonds with similar risk and maturity is 8%. Intere

st will be paid by Mufala semiannually. What is the issue price of the bonds
Business
1 answer:
zubka84 [21]3 years ago
4 0

Answer:

the issue price of the bond is $8,640,999

Explanation:

The computation of the issue price of the bond is shown below:

Particulars                       Amount       PV factor   Present value  

Semi-annual Interest     $300,000     13.59033  $4,077,099  

Principal                         $10,000,000  0.45639  $4,563,900  

Issue price of the bonds                                        $8,640,999

Therefore the issue price of the bond is $8,640,999

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In order to calculate this, we will calculate the future value on an amount invested, gaining interest over the years of investment, and this is given by:

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Hence the future value is calculated as follows:

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7% interest = 7/100 = 0.07

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2. For the last 20 years at 9.5%(0.095) interest:

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FV = 24,589.392 (1 + 0.095)^{20}

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Suppose terri has a​ 25% chance of becoming disabled in any given year. if she does become​ disabled, she will earn​ $0. if terr
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