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Calculate the Proceeds from Bonds

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On January 1, 2010, Taught Inc., issued a $15 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semiannually each June 30 and December 31 and mature on December 31, 2029.

Calculate the proceeds (issue price) of Taught Inc.'s, bonds on January 1, 2010, assuming that the bonds were sold to provide a market rate of return to the investor. (Round the PV factor to 4 decimal places and the final answer to the nearest dollar amount.)

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Solution Summary

This solution provides a step by step response, outlining all of the necessary variables needed to calculate the issue price of a bond. All calculations are included.

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M= face value of bond = $15 million
C=Coupon = 15*14%/2=$1.05 million
r= required rate of return = 16%/2=8% per half year
n= time to ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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