A Company Issues Bonds with a Par Value of $800,000

question 60

Essay

A company issues bonds with a par value of $800,000 on their issue date.The bonds mature in 5 years and pay 6% annual interest in two semiannual payments.On the issue date,the market rate of interest is 8%.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% ...................8.5302
Present value of an annuity for 10 periods at 4% ...................8.1109
Present value of 1 due in 10 periods at 3%................... 0.7441
Present value of 1 due in 10 periods at 4% ...................0.6756

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