On January 1, a Company Issues Bonds with a Par

question 94

Essay

On January 1, a company issues bonds with a par value of $300,000. The bonds mature in five years and pay 8% annual interest each June 30 and December 31. On the issue date, the 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:
$\begin{array}{|l|r|}\hline \text { Present value of an annuity for } 10 \text { periods at } 3 \% & 8.5302 \\\hline \text { Present value of an annuity for } 10 \text { periods at } 4 \% & 8.1109 \\\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 3 \% & 0.7441 \\\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 4 \% & 0.6756 \\\hline\end{array}$

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Definitions:

Blocking

A learning process where the presence of an established conditioned stimulus interferes with the learning of a new conditioned stimulus.

Salience

The quality of being particularly noticeable or important; the state or condition by which something stands out from its surroundings or background in perception.

Behavioral Contrast

A phenomenon in which the rate of response varies according to a change in the reinforcement of an alternative behavior.

Counterconditioning

A behavioral therapy technique that involves teaching the subject to associate a positive response with a stimulus that previously elicited a negative response.