On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds. The market rate of interestat the time was 10%. Ayayai accounts for this investment at amortized cost using the effective interest method. The bonds mature onJanuary 1, 2028, and interest is payable each July 1 and January 1. Note that the bond is acquired on an interest payment date andthere is therefore no accrued interest for Ayayai to pay on January 1. Ayayai has an August 31 year end.(a)How was the price determined? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to O decimalplaces e.g. 58,971.)Present value of maturity valuePresent value of interest paymentsPrice of the bonds$$$

The price of a bond is equal to the sum of the present value of the coupon payments and the present…

Answered: On January 1, 2023, Ayayai Limited pays…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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