Question:
On December 31, 2013, Interlink Communications issued 6% stated rate bonds with a face amount of
$100 million.
The bonds mature on December 31, 2043. Interest is payable annually on each December 31, beginning in
2014.
Determine the price of the bonds on December 31, 2013, assuming that the market rate of interest for
similar bonds was 7%.
Answer:
PV = $6,000,0001 (12.40904) + 100,000,000 (.13137)
PV = $74,454,240 + 13,137,000 = $87,591,240 = price of the bonds
1
$100,000,000 x 6% = $6,000,000
Present value of an ordinary annuity of $1: n = 30, i = 7% (from Table 4)
Present value of $1: n = 30, i = 7% (from Table 2)
On December 31, 2013, Interlink Communications issued 6% stated rate bonds with a face amount of
$100 million.
The bonds mature on December 31, 2043. Interest is payable annually on each December 31, beginning in
2014.
Determine the price of the bonds on December 31, 2013, assuming that the market rate of interest for
similar bonds was 7%.
Answer:
PV = $6,000,0001 (12.40904) + 100,000,000 (.13137)
PV = $74,454,240 + 13,137,000 = $87,591,240 = price of the bonds
1
$100,000,000 x 6% = $6,000,000
Present value of an ordinary annuity of $1: n = 30, i = 7% (from Table 4)
Present value of $1: n = 30, i = 7% (from Table 2)
