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

question 153

Essay

A company issues bonds with a par value of $800,000 on their issue date.The bonds mature in five 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:
$\begin{array}{|l|l|}\hline \text { Present value of an annuity for } 10 \text { periods at } 3 \% & 8.5302 \\\hline \text { Present value of an annuity for } 10 \text { periods at } 4 \% & 8.1109 \\\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 3 \% & 0.7441 \\\hline \text { Present value of } 1 \text { due in } 10 \text { periods at } 4 \% & 0.6756\\\hline\end{array}$

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Definitions:

Group Average

The mean or median value obtained by summing the characteristics or scores of all members of a group and dividing by the number of members.

Typical

Representing the characteristics of a group, category, or class; usual or expected.

Atypical

Not typical, common or regular; unusual or abnormal in characteristics or behavior.

Deviant

Behavior or actions that deviate from the accepted norms of society.