A Company Issues 6%,5 Year Bonds with a Par Value

question 205

Essay

A company issues 6%,5 year bonds with a par value of $800,000 and semiannual interest payments.On the issue date,the annual market rate of interest is 8%.Compute the issue (selling)price of the bonds.The following information is taken from present value tables:
$\begin{array}{llr} \text {Present value of an annuity for 10 periods at \( 3 \% \) } &8.5302\\ \text { Present value of an annuity for 10 periods at \( 4 \% \) } &8.1109\\ \text { Present value of 1 due in 10 periods at \( 3 \% \) } &0.7441\\ \text { Present value of 1 due in 10 periods at \( 4 \% \) } &0.6756\\\end{array}$

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