In: Accounting
On January 1, 2020, Vaughn Corporation purchased 311 of the $1,000 face value, 11%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2030, and pay interest annually beginning January 1, 2021. Vaughn purchased the bonds to yield 11%. How much did Vaughn pay for the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Table values are based on: | |||
Face Amount(311*$1,000) | $ 311,000 | ||
Interest Payment($311,000*11%) | $ 34,210 | ||
Market Interest rate per period | 11.00% | ||
Cash Flow | Table Value(PV of 11% for 10 period) | Amount | Present Value |
PV of Interest | 5.88923 | $ 34,210 | $201,471 |
PV of Principal | 0.35218 | $ 311,000 | $109,528 |
PV of Bonds Payable(Issue Price) | $310,999 | ||
So the selling Price of Bond is $311,000 as the Stated Interest rate(11%) and the market Interest rate is same | |||