Question

Required information [The following information applies to the questions displayed below.) On January 1, 2021, Frontier World issues $39.5 million of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride. 3-a. If the market rate is 9%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place. Round your final answers to the nearest whole dollar.) Amount 39,500,000 $ Bond Characteristics Face amount Interest payment Periods to maturity Market interest rate Issue price 3-b. The bonds will issue at A Discount O A Premium Face amount

Answer 1

3a)		Face Amount	$          39,50,000
		Interest Payment	$            1,58,000
		Periods to maturity	15	years
		Market Interest rate	9%
	Computation Of Bond Price
	a	Semi-annual Interest Amount	$            1,58,000
		($3950000*8%/2)
	b	PV Annuity Factor for (30 Years,4.5%)	16.28889
	c	Present Value Of Annual Interest (a*b)	$    25,73,644.39
	d	Redemption Value	$    39,50,000.00
	e	PV Factor Of (30 Years,4.5%)	0.26700
	g	Present Value Of Redemption Amount (d*e)	$    10,54,650.06
	f	Price Of The Bond (c+g)	$          36,28,294
3b)	Bond will issue at disount