LaTanya Corporation is planning to issue bonds with a face value of $103,500 and a coupon rate of 7 percent. The bonds mature in seven years. Interest is paid annually on December 31. All of the bonds will be sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)
Required:
Compute the issue (sale) price on January 1 of this year for each of the following independent cases:
a. Case A: Market interest rate (annual): 7 percent.
b. Case B: Market interest rate (annual): 5 percent.
c. Case C: Market interest rate (annual): 8 percent.
a.
CASE A:
| $103,500 × .62275 | $ | 64,455 |
| $7,245* × 5.38929 | 39,045 | |
| Issue price (market and stated rate same) | $ | 103,500 |
*$103,500 × .07
b.
CASE B:
| $103,500 × .71068 | $ | 73,555 | |
| $7,245* × 5.78637 | 41,922 | ||
| Issue price (market rate less than stated rate) | $ | 115,477 | (at a premium) |
*$103,500 × .07
c.
CASE C:
| $103,500 × .58349 | $ | 60,391 | |
| $7,245* × 5.20637 | 37,720 | ||
| Issue price (market rate more than stated rate) | $ | 98,111 | (at a discount) |
*$103,500 × .07
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