On January 1, a Company Issues 8%, 5-Year, $300,000 Bonds

question 44

Essay

On January 1, a company issues 8%, 5-year, $300,000 bonds that pay interest semiannually each June 30 and December 31. On the issue date, the annual 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:
$\begin{array}{l|l}\text { Present value of an annuity for } 10 \text { periods at } & 8.5302 \\3 \% \ldots \ldots . & \\\hline \begin{array}{l} \text { Present value of an annuity for } 10 \text { periods at } \\4 \% \ldots \ldots . . .\end{array} & 8.1109\\\hline \begin{array}{l}\text { Present value of } 1 \text { due in } 10 \text { periods at } \\3\%\\\end{array} & 0.7441\\\hline \begin{array}{l}\text { Present value of } 1 \text { due in } 10 \text { periods at } \\4 \% \ldots \ldots \ldots . . . . . . . .\end{array} & 0.6756 \\\hline\end{array}$

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Definitions:

Shareholders

Individuals or institutions that legally own one or more shares of stock in a public or private corporation, giving them a stake in the company's ownership.

Conscious Marketing Principle

An approach to marketing that recognizes the broader impacts of actions on stakeholders and society, aiming for ethical and sustainable practices.

Environmentally Damaging

Something is environmentally damaging if it has a negative impact on the natural world, including pollution, habitat destruction, and contributing to climate change.

Child Labor

The employment of children in any work that deprives them of their childhood, interferes with their ability to attend regular school, and is mentally, physically, socially, or morally harmful.