Brief Exercise 6-15 Bridgeport Inc. issues $2,119,100 of 11% bonds due in 10 years with interest...

Brief Exercise 6-15

Bridgeport Inc. issues $2,119,100 of 11% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 12%.

Click here to view factor tables

What amount will Bridgeport receive when it issues the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Amount received by Bridgeport when bonds were issued

Expert Solution


Principal				2,119,100
interest				233101


Calculation of bond issue price
Where
i=	12.00%
t=	10 years


principal		*	PV of $1 at 12% for 10 yrs =
2,119,100		*	0.32197		=	682,287

interest		*	PV of ordinary annuity at 12%=
233101		*	5.65022		=	1,317,072
bond issue price						1,999,359



so
present value of the face amount						682,287
present value of the semi-annual interest payments						1,317,072
price received for bonds						1,999,359	answer

ekkarill92 answered 2 years ago

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