Question

On January 1, 2021, Water Wonderland issues $20 million of 5% bonds, due in eight years, with interest payable semiannually on June 30 and December 31 each year. Use Table 2 and Table 4.

1. If the market rate is 4%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. (Round "PV Factor" to 5 decimal places. Round other intermediate calculations and final answer to the nearest dollar amount. Enter your answer in dollars, not in millions.)

2. If the market rate is 5%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. (Round "PV Factor" to 5 decimal places. Round other intermediate calculations and final answer to the nearest dollar amount. Enter your answer in dollars, not in millions.)

3. If the market rate is 6%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. (Round "PV Factor" to 5 decimal places. Round other intermediate calculations and final answer to the nearest dollar amount. Enter your answer in dollars, not in millions.)

Table 2

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TABLE 2 Present Value of $1 PV = niya n/i 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 1 0.99010 0.98522 0.98039 0.97561 0.97087 0.96618 0.96154 0.95694 0.95238 0.94787 0.94340 0.93458 0.92593 0.91743 0.90909 0.90090 0.89286 2 0.98030 0.97066 0.96117 0.95181 0.94260 0.93351 0.92456 0.91573 0.90703 0.89845 0.89000 0.87344 0.85734 0.84168 0.82645 0.81162 0.79719 3 0.97059 0.95632 0.94232 0.92860 0.91514 0.90194 0.88900 0.87630 0.86384 0.85161 0.83962 0.81630 0.79383 0.77218 0.75131 0.73119 0.71178 4 0.96098 0.94218 0.92385 0.90595 0.88849 0.87144 0.85480 0.83856 0.82270 0.80722 0.79209 0.76290 0.73503 0.70843 0.68301 0.65873 0.63552 5 0.95147 0.92826 0.90573 0.88385 0.86261 0.84197 0.82193 0.80245 0.78353 0.76513 0.74726 0.71299 0.68058 0.64993 0.62092 0.59345 0.56743 0.88496 0.78315 0.69305 0.61332 0.54276 6 0.94205 0.91454 0.88797 0.86230 0.83748 0.81350 0.79031 0.76790 0.74622 0.72525 0.70496 0.66634 0.63017 7 0.93272 0.90103 0.87056 0.84127 0.81309 0.78599 0.75992 0.73483 0.71068 0.68744 0.66506 0.62275 0.58349 8 0.92348 0.88771 0.85349 0.82075 0.78941 0.75941 0.73069 0.70319 0.67684 0.65160 0.62741 0.58201 0.54027 9 0.91434 0.87459 0.83676 0.80073 0.76642 0.73373 0.70259 0.67290 0.64461 0.61763 0.59190 0.54393 0.50025 10 0.90529 0.86167 0.82035 0.78120 0.74409 0.70892 0.67556 0.64393 0.61391 0.58543 0.55839 0.50835 0.46319 0.59627 0.56447 0.54703 0.51316 0.50187 0.46651 0.46043 0.42410 0.42241 0.38554 0.53464 0.48166 0.43393 0.39092 0.35218 0.50663 0.45235 0.40388 0.36061 0.32197 0.48032 0.42506 0.37616 0.33288 0.29459 11 0.89632 0.84893 0.80426 0.76214 0.72242 0.68495 0.64958 0.61620 0.58468 0.55491 0.52679 0.47509 0.42888 12 0.88745 0.83639 0.78849 0.74356 0.70138 0.66178 0.62460 0.58966 0.55684 0.52598 0.49697 0.44401 0.39711 13 0.87866 0.82403 0.77303 0.72542 0.68095 0.63940 0.60057 0.56427 0.53032 0.49856 0.46884 0.41496 0.36770 14 0.86996 0.81185 0.75788 0.70773 0.66112 0.61778 0.57748 0.53997 0.50507 0.47257 0.44230 0.38782 0.34046 15 0.86135 0.79985 0.74301 0.69047 0.64186 0.59689 0.55526 0.51672 0.48102 0.44793 0.41727 0.36245 0.31524 0.38753 0.35553 0.32618 0.29925 0.27454 0.35049 0.31728 0.31863 0.28584 0.28966 0.25751 0.26333 0.23199 0.23939 0.20900 0.28748 0.25668 0.22917 0.20462 0.18270 0.26070 0.23071 0.20416 0.18068 0.15989 16 0.85282 0.78803 0.72845 0.67362 0.62317 0.57671 0.53391 0.49447 0.45811 0.42458 0.39365 0.33873 0.29189 17 0.84438 0.77639 0.71416 0.65720 0.60502 0.55720 0.51337 0.47318 0.43630 0.40245 0.37136 0.31657 0.27027 18 0.83602 0.76491 0.70016 0.64117 0.58739 0.53836 0.49363 0.45280 0.41552 0.38147 0.35034 0.29586 0.25025 19 0.82774 0.75361 0.68643 0.62553 0.57029 0.52016 0.47464 0.43330 0.39573 0.36158 0.33051 0.27651 0.23171 20 0.81954 0.74247 0.67297 0.61027 0.55368 0.50257 0.45639 0.41464 0.37689 0.34273 0.31180 0.25842 0.21455 0.25187 0.21763 0.18829 0.16312 0.23107 0.19784 0.16963 0.14564 0.21199 0.17986 0.15282 0.13004 0.19449 0.16351 0.13768 0.11611 0.17843 0.14864 0.12403 0.10367 0.14150 0.12522 0.11081 0.09806 0.08678 21 0.81143 0.73150 0.65978 0.59539 0.53755 0.48557 0.43883 0.39679 0.35894 22 0.80340 0.72069 0.64684 0.58086 0.52189 0.46915 0.42196 0.37970 0.34185 23 0.79544 0.71004 0.63416 0.56670 0.50669 0.45329 0.40573 0.36335 0.32557 24 0.78757 0.69954 0.62172 0.55288 0.49193 0.43796 0.39012 0.34770 0.31007 25 0.77977 0.68921 0.60953 0.53939 0.47761 0.42315 0.37512 0.33273 0.29530 0.32486 0.29416 0.24151 0.19866 0.30793 0.27751 0.22571 0.18394 0.29187 0.26180 0.21095 0.17032 0.27666 0.24698 0.19715 0.15770 0.26223 0.23300 0.18425 0.14602 0.16370 0.15018 0.13778 0.12640 0.11597 0.13513 0.11174 0.09256 0.12285 0.10067 0.08264 0.11168 0.09069 0.07379 0.10153 0.08170 0.06588 0.09230 0.07361 0.05882 0.07680 0.06796 0.06014 0.05323 0.04710 30 0.74192 0.63976 0.55207 0.47674 0.41199 0.35628 0.30832 0.26700 0.23138 35 0.70591 0.59387 0.50003 0.42137 0.35538 0.29998 0.25342 0.21425 0.18129 40 0.67165 0.55126 0.45289 0.37243 0.30656 0.25257 0.20829 0.17193 0.14205 45 0.63905 0.51171 0.41020 0.32917 0.26444 0.21266 0.17120 0.13796 0.11130 50 0.60804 0.47500 0.37153 0.29094 0.22811 0.17905 0.14071 0.11071 0.08720 0.20064 0.17411 0.13137 0.09938 0.15352 0.13011 0.09366 0.06763 0.11746 0.09722 0.06678 0.04603 0.08988 0.07265 0.04761 0.03133 0.06877 0.05429 0.03395 0.02132 0.07537 0.05731 0.04368 0.03338 0.04899 0.03558 0.02592 0.01894 0.03184 0.02209 0.01538 0.01075 0.02069 0.01372 0.00913 0.00610 0.01345 0.00852 0.00542 0.00346 0.02557 0.01388 0.00753 0.00409 0.00222

Table 4

Answer 1

Solutions:

F G H I J K Solution 1: Bond will issue at a premium. 5 Chart Values are based on: 8 Cash Flow Par (Maturity) Value Interest (Annuity) (20,000,000*5%*6/12] Price of Bonds 16 Half years 2% Semi annual Table Value * Amount = Present Value 0.72845* $20,000,000 = $14,569,000 13.57771* | $500,000= $6,788,855 $21,357,855 10 11 12 13 Solution 2: Bonds will issue at face vale. 14 15 17 18 19 20 Chart Values are based on: 16 Half years i= 2.50% Semi annual Cash Flow Table Value * Amount = Present Value Par (Maturity) Value 0.67362* $20,000,000 = $13,472,400 Interest (Annuity) (20,000,000*5%*6/12] 13.05500* $500,000/= $6,527,500 Price of Bonds $19,999,900 21 22 23 24 25 Solution 3: Bonds will issue at a discount. 26 27 Chart Values are based on: 28 29 30 16 Half years 3% Semi annual Table Value * Amount = Present Value 0.62317* $20,000,000= $12,463,400 12.56110* | $500,000= $6,280,550 $18,743,950 31 Cash Flow Par (Maturity) Value Interest (Annuity) (20,000,000*5%*6/12] Price of Bonds 32 33 34 35 36 44 45 et719 ) Sheet730 Sheet735 Sheet406 (2) Sheet739