Question

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.)

Answer 1

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