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Ecological Water Filtration, Inc., is going to issue $400,000 face value of 10%, 15-year bonds. The bonds are dated June 30, 2011, call for semiannual
Ecological Water Filtration, Inc., is going to issue $400,000 face value of 10%, 15-year bonds. The bonds are dated June 30, 2011, call for semiannual interest payments, and mature on June 30, 2026.
a. Compute the price investors should offer if they seek a yield of 8% on these bonds. Also, compute the first six months interest, assuming the bonds are issued at this price. Use the interest method and calculate all amounts to the nearest dollar.
b. Repeat part a, assuming investors seek a yield of 12%.
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