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muminat
2 years ago
7

Air Destinations issues bonds due in 10 years with a stated interest rate of 11% and a face value of $500,000. Interest payments

are made semi-annually. The market rate for this type of bond is 12%. Using present value tables, calculate the issue price of the bonds
Business
1 answer:
olga nikolaevna [1]2 years ago
8 0

Answer: $471,324.61

Explanation:

Price of a bond = Present value of coupon payments + Present value of face value at maturity

Coupon payments = 500,000 * 11% * 1/2 years = $27,500

Periodic yield = 12%/ 2 = 6% per semi annual period

Periods = 10 * 2 = 20 semi annual periods

Coupon payment is constant so it is an annuity.

Price of bond = Present value of annuity + Present value of face value at maturity

= (Annuity * Present value interest factor of Annuity, 6%, 20 years) + Face value / (1 + rate) ^ number of periods

= (27,500 * 11.4699) + 500,000 / (1 + 6%)²⁰

= $471,324.61

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3 years ago
What is one major effect of specialization on an economy?
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C. Labor becomes more divided as workers focus on certain skills.

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3 years ago
Pierce Company issued 11% bonds, dated January 1, with a face amount of $800,000 on January 1, 2021. The bonds sold for $739,816
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unrealized gain from change in market value = $10,617

Explanation:

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8 0
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3 years ago
Ahngram Corp. has 1,000 carton of oranges that cost $20 per carton in direct costs and $19.00 per carton in indirect costs and s
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