On January 1, a company issues 8%, 5-year, $300,000 bonds that pay interest semiannually each June 30 and December 31. On the issue date, the annual market rate of interest for the bonds is 10%. Compute the price of the bonds on their issue date. The following information is taken from present value tables:Present value of an annuity (series of payments) for 10 periods at 4%8.1109Present value of an annuity (series of payments) for 10 periods at 5%7.7217Present value of 1 (single sum) for 10 periods at 4%0.6756Present value of 1 (single sum) for 10 periods at 5%0.6139
What will be an ideal response?
| Present value of principal | $300,000 * 0.6139 = | $184,170 |
| Present value of interest | $300,000 * 0.04 * 7.7217 = | 92,660 |
| Selling price of the bond | ? | $276,830 |
You might also like to view...
Helen is planning to open a high-fashion clothing store for young professional women. Which of the following descriptors is the most important consideration for the fixtures?
A. Economical B. Elegant C. Feminine D. Practical
Legal obligations to give up things of value in the future are known as ________.
A. assets B. owners' equity C. borrowings D. liabilities
Experienced travelers report that the primary criterion for doing business in China is ________.
A. technical competence B. a persuasive top management C. savvy marketing D. hard currency
Which of the following is an example of downward communication in an organization?
A) A business professor submits a conference report to her dean. B) Four accountants meet to discuss the quarterly financial reports. C) Members of a task force submit a progress report to the CEO. D) The CFO sends information about a new accounting regulation to employees in the accounting department.