The Face Value of a Bond Is $71,000,its Stated Rate

question 101

Multiple Choice

The face value of a bond is $71,000,its stated rate is 7%,and the term of the bond is five years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.Determine the present value of the bonds at issuance. Present value of $1:
$$\begin{array} { | c | l | l | l | l | l | } \hline & 4 \% & 5 \% & 6 \% & 7 \% & 8 \% \\\hline 5 & 0.822 & 0.784 & 0.747 & 0.713 & 0.681 \\\hline 6 & 0.790 & 0.746 & 0.705 & 0.666 & 0.630 \\\hline 7 & 0.760 & 0.711 & 0.665 & 0.623 & 0.583 \\\hline 8 & 0.731 & 0.677 & 0.627 & 0.582 & 0.540 \\\hline 9 & 0.703 & 0.645 & 0.592 & 0.544 & 0.500 \\\hline 10 & 0.676 & 0.614 & 0.558 & 0.508 & 0.463 \\\hline\end{array}$$ Present value of ordinary annuity of $1:
$$\begin{array} { | c | l | l | l | l | l | } \hline & 4 \% & 5 \% & 6 \% & 7 \% & 8 \% \\\hline 5 & 4.452 & 4.329 & 4.212 & 4.100 & 3.993 \\\hline 6 & 5.242 & 5.076 & 4.917 & 4.767 & 4.623 \\\hline 7 & 6.002 & 5.786 & 5.582 & 5.389 & 5.206 \\\hline 8 & 6.733 & 6.463 & 6.210 & 5.971 & 5.747 \\\hline 9 & 7.435 & 7.108 & 6.802 & 6.515 & 6.247 \\\hline 10 & 8.111 & 7.722 & 7.360 & 7.024 & 6.710 \\\hline\end{array}$$

• A) $50,844
• B) $20,156
• C) $68,152
• D) $71,000

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