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 is 6%. 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 3%........8.5302Present value of an annuity for 10 periods at 4%........8.1109Present value of 1 due in 10 periods at 3%................0.7441Present value of 1 due in 10 periods at 4%................0.6756
What will be an ideal response?
| Present value of principal………… | $300,000 * 0.7441 = | $223,230 |
| Present value of interest…………… | $300,000 * .04 * 8.5302 = | 102,362 |
| Price of bonds…………………………. | $325,592 |
You might also like to view...
The fundamental difference between internal and external auditing is that
a. internal auditors represent the interests of the organization and external auditors represent outsiders b. internal auditors perform IT audits and external auditors perform financial statement audits c. internal auditors focus on financial statement audits and external auditors focus on operational audits and financial statement audits d. external auditors assist internal auditors but internal auditors cannot assist external auditors
The augmented product is the actual product plus the various services and benefits offered with it, such as a warranty, free delivery, installation, and maintenance
Indicate whether the statement is true or false
A financial analyst tells you that investing in stocks will allow you to double your money in 7
years. What annual rate of return is the analyst assuming you can earn? A) 9.87% B) 10.01% C) 8.76% D) 10.41%
In an operation very similar to that performed by a modem, analog data can be represented by a digital signal; the device that performs this function is a ________
Fill in the blanks with correct word