Bond Pricing Problems

1. On January 2, 2010, Wine Corporation wishes to issue $2,000,000 (par value) of its 8%, 10 year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Compute the amount that Wine will realize from the sale (issuance) of the bonds.

2. Stech Co. is issuing $2.6 million 12% bonds in a private placement on July 1, 2010. Each $1,000 bond pays interest semi-annually on December 31 and June 30 of each year. The bonds mature in ten years. At the time of issuance, the market interest rate for similar types of bonds was 8%. What is the expected selling price of the bonds?

136. $2.59033) = $3.45639) + ($156.306.000. 2.1446) + ($2. ($2.000.08 = $160.705.000 × 0.000 × 6.Solutions 1.000 × 13.754.000 (annual interest payment) ($160. .000 × .000 × .3855) = $1.600.

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