On January 1, 2020, Vaughn Corporation purchased 311 of the $1,000 face value, 11%, 10-year bonds...

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.)

Expert Solution


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

ekkarill92 answered 3 years ago

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