Question: on 1 july 2020 golden ltd acquired some government bonds...
On 1 July 2020, Golden Ltd acquired some government bonds which pay interest of $100,000 at the end of each of the next five years and the principal of $1,000,000 on 30 June 2025.
The government bonds were acquired at a price that will generate an effective interest rate of 5%. On 30 June 2021, the required market rates of return for these government bonds decreased to 4%.
5.2 Determine the initial purchase price of the government bonds on 1 July 2020. (2 marks)