Answered

Join IDNLearn.com today and start getting the answers you've been searching for. Discover reliable and timely information on any topic from our network of experienced professionals.

A company issued 9%, 15-year bonds with a face amount of $70 million. The market yield for bonds of similar risk and maturity is 9%. Interest is paid semiannually. At what price did the bonds sell

Sagot :

Anthougoidn

The price at which the bonds were sold was $70 million because they were not sold below or above the par value.

How is the price of bonds determined?

The price of bonds can be determined by calculating the present value of the periodic interest payments (based on the coupon rate) over the bonds' maturity period and then discounting the payments at the market interest rate.

In this case, we used an online finance calculator to determine the present value of the interest payments as follows:

Data and Calculations:

N (# of periods) = 30 (15 years x 2)

I/Y (Interest per year) = 9%

PMT (Periodic Payment) = $3.15 million ($70 million x 9%)

FV (Future Value) = $70 million

Results:

PV = $70,000,000.00

Sum of all periodic payments = $94,500,000.00 ($3.15 million x 30)

Total Interest = $94,500,000.00 ($3.15 million x 30)

Thus, the price at which the bonds are issued is $70 million.

Learn more about bonds issuance at https://brainly.com/question/25596583

We appreciate your presence here. Keep sharing knowledge and helping others find the answers they need. This community is the perfect place to learn together. Discover the answers you need at IDNLearn.com. Thanks for visiting, and come back soon for more valuable insights.