On 14 March 2013 a company issued a bond with a face value of $100,000 that...

On 14 March 2013 a company issued a bond with a face value of $100,000 that matures exactly 25 years later. The coupon rate is 6% p.a. compounded half-yearly. What is the bond's value on 14 September 2018 assuming the market yield is 5% p.a. compounded half-yearly.

	a.	$100,000.00
	b.	$112,365.17
	c.	$112,174.30
	d.	$117,017.04
	e.	$112,551.39

Expert Solution

Starting from March 14th 2013, there are are 50 semiannual time periods for the next 25 years.
From March 14th 2013 to Sept 14th 2018, there are 11 semiannual time periods.
The remaining time periods till maturity equals 39 semiannual time periods.

Par/Face value	100000
Annual Coupon rate	0.06
Annual coupon	6000
semi-annual coupon	3000

Present Value = Future value/[(1+(r/m))^mt]
r is the interest rate that is 5%.
m is the compounding period that is 2
mt is the time period.
price of the bond = sum of present values of future cash flows
r/2	0.025
mt	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	25	26	27	28	29	30	31	32	33	34	35	36	37	38	39
future cash flow	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	3000	103000
present value	2926.829	2855.443	2785.798	2717.852	2651.563	2586.891	2523.796	2462.24	2402.185	2343.595	2286.434	2230.668	2176.261	2123.182	2071.397	2020.875	1971.585	1923.498	1876.583	1830.813	1786.159	1742.594	1700.092	1658.626	1618.172	1578.704	1540.199	1502.633	1465.984	1430.228	1395.344	1361.312	1328.109	1295.716	1264.113	1233.281	1203.201	1173.855	39319.36
sum of present values	112365.17

The bond's value on 14th september 2018 is:
b) $112365.17.

jeff jeffy answered 8 months ago

A corporate bond with a face value of $100,000 was issued six years ago and there...

A corporate bond with a face value of $100,000 was issued six years ago and there are four years remaining until maturity. The bond pays semi-annual coupon payments of $4500, the coupon rate is 9% pa paid twice yearly and rates in the marketplace are 9.4% pa compounded semi-annually. What is the value of the bond today? a. $98,975.05 b. $98,196.97 c. $100,000.00 d. $98,691.54 e. $84,263.76

In March, 2019, Volkswagen AG issued a ten-year bond with a face value of €4,000 and...

In March, 2019, Volkswagen AG issued a ten-year bond with a face value of €4,000 and paying an annual coupon of 3 per cent. What is the price of the bond if the YTM is: a. 1 percent. b. 3 percent. c. 6 percent. (Assume interest is calculated at the beginning of the period and paid annually)

on January 1, 2013, Johnson corporation issued a 10 year, 6% bond with a face value...

on January 1, 2013, Johnson corporation issued a 10 year, 6% bond with a face value of $2,175,000. The bonds were sold to yield 5%. Interest is payable semi-annually on January 1 and July 1. Effective ammortization is to be used. What accounts related to this bond would be shown on the 12/31/13 balance sheet? show in the proper sections. Current Liabilities: Long-term Liabilities:

Company A issues a bond with a $100,000 face value. The bond matures in three years....

Company A issues a bond with a $100,000 face value. The bond matures in three years. The stated interest rate is 9% and the market interest rate is 12%. Interest payments are made every 6 months. Record the journal entry for the issuance of the bond.

On March 1, 2014, Peeks Corporation issued a $10 million face-value bond with 10% face interest...

On March 1, 2014, Peeks Corporation issued a $10 million face-value bond with 10% face interest rate and a maturity of fifteen years. The semiannual interest payments are made on March 1 and September 1. The bond was issued at a premium for $10,980,500. a. What is the effective yield of the bond?

On March 1, 2014, Squeeks Corporation issued a $1 million face-value bond with 11% face interest...

On March 1, 2014, Squeeks Corporation issued a $1 million face-value bond with 11% face interest rate and a maturity of fifteen years. The semi- annual interest payments are made on March 1 and September 1. The bond was issued at such a price as to yield 9.6%. a. What was the issue price of the bond? b. Prepare the journal entry to record the sale of the bond on March 1, 2014.

On January 1 of this year, Ikuta Company issued a bond with a face value of...

On January 1 of this year, Ikuta Company issued a bond with a face value of $145,000 and a coupon rate of 7 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 8 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final...

On 4 February 2010 a company issued a bond with a face value of $500,000 that...

On 4 February 2010 a company issued a bond with a face value of $500,000 that matures exactly 25 years later. The coupon rate is 5% p.a. compounded half-yearly. What is the bond's value on 4 February 2018 assuming the market yield is 8% p.a. compounded half-yearly. a. $230,139.97 b. $670,428.40 c. $408,757.48 d. $361,916.02 e. $363,175.43

June 30th: The company issues a 5-year bond with a face value of $100,000 and a...

June 30th: The company issues a 5-year bond with a face value of $100,000 and a stated annual rate of 8%. Interest is due on June 30th each year. The market rate is 6% on the date of issuance. Prepare the Journal Entry for June 1st, and the journal entry to acrrue interest at year end. The effective interest method is used to amorize bond premiums and discounts.

Company B issues a ten-year bond that has a face value (or par value) of $100,000...

Company B issues a ten-year bond that has a face value (or par value) of $100,000 and a stated rate of 4%. The interest is paid annually, the date is January 1, 2018 and the current market rate is 6%. What is the issue price of the bond (round to the nearest dollar)? Show your work (Using the preset tables)

Question