On January 1,a Company Issues Bonds Dated January 1 with a Par

question 214

Multiple Choice

On January 1,a company issues bonds dated January 1 with a par value of $200,000.The bonds mature in 3 years.The contract rate is 4%,and interest is paid semiannually on June 30 and December 31.The market rate is 5%.Using the present value factors below,the issue (selling) price of the bonds is:
$$\begin{array} { c c c c } &&{ \text { Present Value of arn } } \\\mathrm { n} = & \mathrm { i } = & \text { Annuity } & \text { Present value of } \$ 1 \\3 & 4.0 \% & 2.7751 & 0.8890 \\6 & 2.0 \% & 5.6014 & 0.8880 \\3 & 5.0 \% & 2.7232 & 0.8638 \\6 & 2.5 \% & 5.5081 & 0.8623\end{array}$$

• A) $205,607.
• B) $194,492.
• C) $200,000.
• D) $22,032.
• E) $172,460.

---

Definitions:

Population Size

The total number of individuals or items in the group that is being studied in a statistical analysis.

Normal Population

A statistical term referring to a population that follows a normal distribution where a large number of instances are clustered around the mean.

Probability Distribution

This mathematical method determines the chances of various results happening in an experiment.

Sample Mean

The average value of a sample, calculated by summing all observations and dividing by the number of observations.