Can someone help me with an accounting problem?

[blazinb2000 10+ year member]

Alright I am doing some studying for finals and I am looking over some examples my professor handed out to us to study for the final exam. I can't figure out where he is coming up with the answer so I thought maybe someone on here could help me. I am not asking for help to do homework, only to help me understand an example problem given out by my professor. This is a direct copy and paste from his page. I would email him but the test is tomorrow and I doubt I would get a reply before then. The problem:

Simpson Corporation issues 18% coupon bonds on January 1, 2007. The bonds have a face value of $3,600,000, interest is payable annually on December 31, and have a term of twelve years. The market rate of interest on January 1, 2007 is 9%.

Required:

a. At what price (where par = 100) would the 18% bonds be issued?

His answer:

= 648,000 (PVA, n=12, i=9%) + 3,600,000 (PV, n=12, i=9%)

= 5,919,933.60

Price = 5,919,933.60 / 3,600,000 = 164.44

My problem is how he came up with the 5,919,933.60 number?

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[crunktimes.com 5,000+ posts]

shake it more than twice you're playing with it.

 

[anj46907 10+ year member]

shake it more than twice you're playing with it.

x2:wow:

 

[lilmaniac2 5,000+ posts]

Alright I am doing some studying for finals and I am looking over some examples my professor handed out to us to study for the final exam. I can't figure out where he is coming up with the answer so I thought maybe someone on here could help me. I am not asking for help to do homework, only to help me understand an example problem given out by my professor. This is a direct copy and paste from his page. I would email him but the test is tomorrow and I doubt I would get a reply before then. The problem:

Simpson Corporation issues 18% coupon bonds on January 1, 2007. The bonds have a face value of $3,600,000, interest is payable annually on December 31, and have a term of twelve years. The market rate of interest on January 1, 2007 is 9%.

Required:

a. At what price (where par = 100) would the 18% bonds be issued?

His answer:

= 648,000 (PVA, n=12, i=9%) + 3,600,000 (PV, n=12, i=9%)

= 5,919,933.60

Price = 5,919,933.60 / 3,600,000 = 164.44

My problem is how he came up with the 5,919,933.60 number?

You sure you wrote that down right, because I can't follow it either

 

[blazinb2000 10+ year member]

You sure you wrote that down right, because I can't follow it either

Yea direct copy and paste from his word document posted on his website.

 

[wu36ca 10+ year member]

Do you have present value tables?

 

[blazinb2000 10+ year member]

Do you have present value tables?

Yea I do, but I don't understand it very well.

 

[blackman 10+ year member]

umm.....tell him it doesnt matter as long as you have 11 dollars. since 11 dollars can buy you crack which you can sell for more and then on and on until you are rich3.

btw do you go to akransas university?

 

[blazinb2000 10+ year member]

umm.....tell him it doesnt matter as long as you have 11 dollars. since 11 dollars can buy you crack which you can sell for more and then on and on until you are rich3.

btw do you go to akransas university?

I go to Arkansas State University in Jonesboro.

 

[wu36ca 10+ year member]

I get 5920061 //content.invisioncic.com/y282845/emoticons/confused.gif.e820e0216602db4765798ac39d28caa9.gif

 

[wu36ca 10+ year member]

[(648000*7.16073)+(3600000*.35553)]=answer

 

[blazinb2000 10+ year member]

I get 5920061 //content.invisioncic.com/y282845/emoticons/confused.gif.e820e0216602db4765798ac39d28caa9.gif

Yea I was getting a different number earlier that was a few thousand below his answer.

 

[wu36ca 10+ year member]

Rounding error then.

 

[blazinb2000 10+ year member]

Rounding error then.

Yea must have been. I really appreciate the help man.