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On January 1, 2018, Rare Bird Ltd

question 73

Essay

On January 1, 2018, Rare Bird Ltd. purchased 12% bonds dated January 1, 2018, with a face amount of $20 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
Required: Determine the price of the bonds at January 1, 2018.


Definitions:

Radiometric Dating

A technique used to date materials such as rocks or carbon, by measuring the decay rate of radioactive isotopes contained within those materials.

K-Pg Boundary

A geological signature marking the transition between the Cretaceous (K) and Paleogene (Pg) periods, approximately 66 million years ago, associated with the mass extinction event that included the demise of the dinosaurs.

Cretaceous Period

A geological period from about 145 to 66 million years ago, known for being the last portion of the age of dinosaurs.

Tectonic Plates

Massive, irregularly shaped slabs of solid rock composing the Earth's lithosphere, whose movements cause earthquakes, volcanic eruptions, and the formation of mountains.

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