On January 1, 2021, Frontier World issues $39.0 million of 7% bonds, due in 10 years, with interest payable semiannually on
June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water
ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride.
Required:
1-a. If the market rate is 6%, calculate the issue price. (FV of $1. PV of $1. EVA of $1, and PVA of $1) (Use appropriate factor(s) from the
tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1
decimal place. Round your final answers to the nearest whole dollar.)

A bond is a debt instrument used by businesses to raise capital needed for business operations. Bondholders earn interest on the amount invested and at the maturity of the bond, they are paid back the amount invested.

The issue price of the bond can be determined by calculating the present value of the bond. Present value is the sum of discounted cash flows. The cash flow of this bond are the semi annual interest payment and the payment of the face value of the bond at maturity.

The present value can be determined using a financial calculator:

Cash flow from period 1 - 20 : 7% x 39 million = $2.73 million
Cash flow i period 20 = 39 million
I = 6%

Present value = $43.47 million

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