James Corporation is planning to issue bonds with a face val

James Corporation is planning to issue bonds with a face value of S510,000 and a coupon rate of 6 percent. The bonds mature in 7 years and pay interest semiannually every June 30 and December 31. All of the bonds will be sold on January 1 of this year. (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 answer to whole dollars.) Required: Compute the issue (sale) price on January 1 of this year for each of the following independent cases: a. Case A: Market interest rate (annual): 4 percent. ssue price b. Case B: Market interest rate (annual): 6 percent. price c. Case C: Market interest rate (annual): 8.5 percent. price

Solution

Case A : Issue price of bonds = Present value of interest+Present value of maturity

= (510000*3%*12.10625)+(510000*0.75788)

Issue price of bonds = 571744

Case B : Issue price of bonds = Present value of interest+Present value of maturity

= (510000*3%*11.29607)+(510000*0.66112)

Issue price of bonds = $510000

Case C : Issue price of bonds = Present value of interest+Present value of maturity

= (510000*3%*10.3909)+(510000*0.5584)

Issue price of bonds = 443765