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

question 167

Essay

A company issues bonds with a par value of $800,000 on their issue date.The bonds mature in 5 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:

Phenyl Alanine

An aromatic amino acid known as phenylalanine, important in the biosynthesis of proteins.

Strecker Synthesis

A method for synthesizing amino acids by the reaction of aldehydes with ammonia and hydrogen cyanide.

Racemic Valine

A mixture consisting of equal amounts of the two enantiomers of valine, an amino acid, with no optical activity due to the symmetry.

3-Methylbutanoic Acid

An organic compound with the formula C5H10O2, known for its pungent odor resembling sweat or body odor.