On January 1, 2018, Frontier World issues $39.3 million of 7% bonds, due in 10 y
ID: 2567539 • Letter: O
Question
On January 1, 2018, Frontier World issues $39.3 million of 7% bonds, due in 10 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.
1-a. If the market rate is 6%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.)
1-b. The bonds will issue at
A Discount, Premium or Face amount?
2-a. If the market rate is 7%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.)
2-b. The bonds will issue at
A Discount, Premium or Face amount?
3-a. If the market rate is 8%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.)
3-b. The bonds will issue at
A Discount, Premium or Face amount?
Explanation / Answer
1a. Issue price when market interest rtae is 6%
1b. Bonds are issued at premium.
2a. Bond issue price when market rate is 7%
2b. Bonds are issued at par.
3a. When market rate is 8% then issue price is:
3b. Bonds are issued at discount.
Table value are based on: n= 20 i= 3% Cash Flow Table Value Amount Present Value Par (maturity value) 0.5537 39,300,000 21,760,410 Interest (annuity) 14.877 1,375,500.000 20,463,314 42,223,724