Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Present Value of Bonds Payable; Discount
Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market
(effective) interest rate of 9%.
Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar.
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Remember, the selling price of a bond is the sum of the present values of the face amount of the bonds due at the maturity date and the periodic interest to be paid on the
bonds,
The market rate of interest is used to compute the present value of both the face amount and the periodic interest.
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- Can you help me with this problem with step by step explanation, please? Thank you :)arrow_forwardYou are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 9 percent, which is paid semiannually. The yield to maturity on the bonds is 8 percent annual interest. There are 15 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Compute the price of the bonds based on semiannual analysis. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. With 10 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.arrow_forward(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 17-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market price of the bond is $855, and the market's required yield to maturity on a comparable-risk bond is 12 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds?arrow_forward
- Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Determining bond amounts Savvy Drive-Ins borrowed money by issuing $3,500,000 of 9% bonds payable at 99.5. Interest is paid semiannually. Requirements How much cash did Savvy receive when it issued the bonds payable? How much must Savvy pay back at maturity? How much cash interest will Savvy pay each six months?arrow_forwardSunland Railroad Co. is about to issue $286,000 of 9-year bonds paying an 11% interest rate, with interest payable annually. The discount rate for such securities is 12%. Click here to view the factor table. In this case, how much can Sunland expect to receive from the sale of these bonds? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0 decimal places, e.g. 2,525.) Present value of bonds $ LAarrow_forwardPresent value of bonds payable; discount Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder issued $27,000,000 of three-year, 9% bonds, with interest payable semiannually, at a market (effective) interest rate of 11%. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below. X Open spreadsheet Determine the present value of the bonds payable. Round your answer to the nearest dollar. $arrow_forward
- will thumb up if correct. only need (b). please show the work too (FV-PV)arrow_forwardSagararrow_forwardDetermine the interest payment for the following three bonds. (Assume a $1,000 par value.) (Round your answers to 2 decimal places.) 1. 3 % percent coupon corporate bond (paid semiannually): 2. 4.25 percent coupon Treasury note (paid semiannually):arrow_forward
- Markway Inc. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of $800. Required: 1. Calculate how much Markway is able to borrow if each bond is sold at a premium of $30. 2. Calculate how much Markway is able to borrow if each bond is sold at a discount of $10. 3. Calculate how much Markway is able to borrow if each bond is sold at 92% of par. 4. Calculate how much Markway is able to borrow if each bond is sold at 103% of par. 5. Assume that the bonds are sold for $775 each. Prepare the entry to recognize the sale of the 750 bonds. Record issuance of bonds at discount 6. Assume that the bonds are sold for $950 each. Prepare the entry to recognize the sale of the 750 bonds. Record issuance of bonds at premiumarrow_forwardFind the total proceeds (in $) from the sale of 30 bonds with a coupon rate of 8.75 and a current price of 96.575. (Round your answer to the nearest cent.) The commission charge is $6.00 per bond. The date of the transaction is 145 days since the last interest payment. $2821.53 xarrow_forwardValuing Bonds Using Present ValueE3B. Kirby, Inc., is considering the sale of two bond issues. Choice A is a $800,000bond issue that pays semiannual interest of $64,000 and is due in 20 years. Choice B isa $800,000 bond issue that pays semiannual interest of $60,000 and is due in 15 years.Assume that the market interest rate for each bond is 8 percent. Calculate the amountthat Kirby will receive if both bond issues are made. (Hint: Calculate the present valueof each bond issue and sum.)arrow_forward
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