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 (series of payments) for 10 periods at 3%8.5302Present value of an annuity (series of payments) for 10 periods at 4%8.1109Present value of 1 (single sum) due in 10 periods at 3%.0.7441Present value of 1 (single sum) 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 |
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