How to find purchase price of bonds?

Here is the workbook problem...


What is the purchase price of fifteen Columbia Corporation bonds with a coupon rate of 7 3/4 and a current market price of 98? The commission charge is $8 per bond. The date of the transaction is March 1, and the bond pays interest on November 1 and May 1.|||There are Five months of interest on the bond. Nov 1 to Feb 28. I guess you break that down into days. Times the daily interest rate of 77.50 per bond (7.75*1,000)divided by 360 (days) times the fifteen bonds. the bonds are selling for $980 each so you add the interest due to the price of the bonds. The commission is NOT part of the price of the bond but is part of the BASIS for the bond of the new owner.





Deduct $8 times 15 for the commission.|||The PURCHASE PRICE of the bond is 98% x face value. This is the amount that should be recorded in the books under the caption of Investment in Bonds account. Since you haven't given me the face value of each bond, just follow the formula above.





However, the TOTAL PAYMENT you should make is:


98% x face value + face value x 7.75% x 3/12





The total payment should include the interest the bond earned for a three months period.





The 3/12 above is 3 = from November 1 to February 30 while 12 refers to twelve months.





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