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 for 10 periods at 4%8.1109Present value of an annuity for 10 periods at 5%7.7217Present value of 1 for 10 periods at 4%0.6756Present value of 1 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 |
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