Question 2.5 (Total: 18 marks)

Spin Corporation manufacturers cycling equipment for fitness classes. Recently, the companys Executive VP of Operations requested construction of a new plant to meet the increasing demand for the companys workout bikes. After considering the request, the BOD has decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on March 1, 2021, due on March 1, 2035, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%.

Required:

1. Determine the selling price of the bonds. You may use the factor tables A.2 and A.4 in appendix A, or a financial calculator or Excels PV function to complete the calculation.

2. What is the basis of measurement for the bond?