BA Corp issues 5.0%, 5-year bonds with a total face amount of $1,000,000. The market interest...

BA Corp issues 5.0%, 5-year bonds with a total face amount of $1,000,000. The market interest rate for bonds of similar risk and maturity is 5.2%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET.

1. $___________How much will be paid in interest each interest payment?

2. $___________ (rounded to nearest dollar). What is the present value of the interest payments?

3. $___________ (rounded to nearest dollar). What is the issue price of the bond?

Solutions

Expert Solution

While Calculations of Present Value of Interest payment and bond price Market Interest rate is to be taken in 2.6% as payment is made on semi Annual. Present Value factor is calculated as 1/1+2.6%.

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ekkarill92 answered 1 year ago

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