what is the purchase price of eight soft corporation bonds with an annual interest rat of 8 1/2% and a current market price of 83? The commission charge is $5 per bond. the date of the transaction is January 1, and the bond pays on Otober 1 and april 1.
To calculate the purchase price of the eight Soft Corporation bonds, we need to consider several factors, including the annual interest rate, the current market price, the commission charge, and the payment dates.
1. Calculate the annual interest payment for one bond:
Annual interest payment = (Annual interest rate / 100) * Face value of the bond
In this case, the annual interest rate is 8 1/2% or 8.5%. However, we need to clarify the face value of the bond to proceed.
2. Determine the face value of the bond:
The face value can usually be found in the bond prospectus or identified by the issuer. Once we know the face value, we can continue with the calculation.
3. Calculate the annual interest payment for one bond using the face value:
Annual interest payment = (8.5% / 100) * Face value
4. Calculate the total annual interest payment for all eight bonds:
Total annual interest payment = Annual interest payment per bond * Number of bonds
5. Calculate the cost of the eight bonds before commission charges:
Total cost of the bonds = Current market price * Number of bonds
6. Add the commission charges to the total cost of the bonds:
Total cost of the bonds + Commission charges
7. Since the bond pays on October 1 and April 1, it is important to consider the time passed since January 1. Determine the exact number of days, and adjust the purchase price accordingly using bond pricing conventions such as accrued interest or interest in advance.
Please provide the face value of the bond for a more accurate calculation.