On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds. The market rate of interest at the time was 10%. Ayayai accounts for this investment at amortized cost using the effective interest method. The bonds mature on January 1, 2028, and interest is payable each July 1 and January 1. Note that the bond is acquired on an interest payment date and there is therefore no accrued interest for Ayayai to pay on January 1. Ayayai has an August 31 year end. How was the price determined? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to O decimal places e.g. 58,971.) Present value of maturity value Present value of interest payments Price of the bonds $ $ $
On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds. The market rate of interest at the time was 10%. Ayayai accounts for this investment at amortized cost using the effective interest method. The bonds mature on January 1, 2028, and interest is payable each July 1 and January 1. Note that the bond is acquired on an interest payment date and there is therefore no accrued interest for Ayayai to pay on January 1. Ayayai has an August 31 year end. How was the price determined? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to O decimal places e.g. 58,971.) Present value of maturity value Present value of interest payments Price of the bonds $ $ $
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
Related questions
Question
Please do not give solution in image format ?.
Transcribed Image Text:On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds. The market rate of interest
at the time was 10%. Ayayai accounts for this investment at amortized cost using the effective interest method. The bonds mature on
January 1, 2028, and interest is payable each July 1 and January 1. Note that the bond is acquired on an interest payment date and
there 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 decimal
places e.g. 58,971.)
Present value of maturity value
Present value of interest payments
Price of the bonds
$
$
$
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps with 3 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education