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

question 129

Essay

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

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Definitions:

Pontiac's Uprising

A rebellion led by the Ottawa leader Pontiac in 1763, uniting Native American tribes against British post-colonial policies in the Great Lakes region.

Ohio Country

A term used in the 18th century for the territory west of the Appalachian Mountains, contested by French, British, and various Native American tribes before becoming part of the United States.

Seven Years' War

A global conflict that took place between 1756 and 1763, involving most of the great powers of the time and affecting Europe, North America, Central America, the West African coast, India, and the Philippines.

Iroquois

A historically powerful and influential group of Native American tribes forming the Iroquois Confederacy, primarily located in the northeastern United States.