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Important information about Issue price of bonds

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1) Amstop Company issues $20,000,000 of 10-year, 9% bonds on March 1, 2007 at 97 plus accrued interest. The bonds are dated January 1, 2007, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

2) On January 1, 2007, Bleeker Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are below. What is the issue price of the bonds?

Present value of 1 for 8 periods at 6%.. .... .627
Present value of 1 for 8 periods at 8%.. .... .540
Present value of 1 for 16 periods at 3%.. .... .623
Present value of 1 for 16 periods at 4%.. .... .534
Present value of annuity for 8 periods at 6%.. .. 6.210
Present value of annuity for 8 periods at 8%.. .. 5.747
Present value of annuity for 16 periods at 3%.. 12.561
Present value of annuity for 16 periods at 4%......11.652

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Solution Preview

1. Amount received for bonds = 20,000,00X0.97 = 19,400,000
Amount received for interest for 2 months = 20,000,000X9%X2/12 = ...

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The solution explains how to calculate the issue price of bonds

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Bond Prices and Yields.

1. Several years ago, Castles in the Sand, Inc., issued bonds at face value at a yield to maturity of 7 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond?
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Consider the data on the following two mutually exclusive projects under consideration by the Stephen Company:


Project A

Project B












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