Sharmer Company Issues 5%, 5-Year Bonds with a Par Value

question 111

Multiple Choice

Sharmer Company issues 5%, 5-year bonds with a par value of $1,000,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 6%. What is the bond's issue (selling) price, assuming the following factors: $\begin{array}{rlll}&&\text { Present Value of an }\\n=&i=&\text { Annuity }&\text { Present value of } \mathbb{\$1}\\5 & 5 \% & 4.3295 & 0.7835 \\10 & 3 \% & 8.7521 & 0.7812 \\5 & 6 \% & 4.2124 & 0.7473 \\10 & 3 \% & 8.5307 & 0.7441\end{array}$

• A)$1,213,255
• B)$957,355
• C)$1,000,000
• D)$786,745
• E)$1,250,000

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Definitions:

Motivating Force

A psychological or physiological factor that drives an individual towards a goal or satisfies a need.

Behavior

The actions, reactions, or mannerisms exhibited by individuals, often studied in psychology to understand and predict human motives and development.

Pessimistic

A tendency to see the worst aspect of things or believe that the worst will happen; a lack of hope or confidence in the future.

Conscious Forces

Psychological elements within an individual’s awareness that influence thoughts, feelings, and actions.