The face value of a bond is $71,000, its stated rate is 7%, and the term of the bond is five years
The bond pays interest semiannually. At the time of issue, the market rate is 8%. Determine the present value of the bonds at issuance.
Present value of $1:
4% 5% 6% 7% 8%
5 0.822 0.784 0.747 0.713 0.681
6 0.790 0.746 0.705 0.666 0.630
7 0.760 0.711 0.665 0.623 0.583
8 0.731 0.677 0.627 0.582 0.540
9 0.703 0.645 0.592 0.544 0.500
10 0.676 0.614 0.558 0.508 0.463
Present value of annuity of $1:
4% 5% 6% 7% 8%
5 4.452 4.329 4.212 4.100 3.993
6 5.242 5.076 4.917 4.767 4.623
7 6.002 5.786 5.582 5.389 5.206
8 6.733 6.463 6.210 5.971 5.747
9 7.435 7.108 6.802 6.515 6.247
10 8.111 7.722 7.360 7.024 6.710
A) $50,844
B) $20,156
C) $68,152
D) $71,000
C .Future value 71,000
Present value factor x 0.676
Present value ($71,000 x 0.676 ) $47,996
Interest 2,485
Annuity PV factor x 8.111
Present value of interest payments $20,156
_______
Total present value $68,152
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