Marwick Corporation issues 8%, 5 year bonds with a par value of $1,000,000 and semiannual interest payments. On the issue date,

Question

3 years ago

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Marwick Corporation issues 8%, 5 year bonds with a par value of $1,000,000 and semiannual interest payments. On the issue date,

the annual market rate for these bonds is 6%. What is the bond's issue (selling) price, assuming the Present Value of $1 factor for 3% and 10 semi-annual periods is .7441 and the Present Value of an Annuity factor for the same rate and period is 8.5302?
a. $1,000,000

b. $1,341,208

c. $658,792

d. $789,244

e. $1,085,308

Business

1 answer:

schepotkina [342] · Answer 1 · 2021-12-27T23:07:12+03:00

Answer:

The bond's issue(selling) price is $1,085,308.00

Explanation:

The price of the bond is the present values of the future cash flows discounted to present values.Instead of discounting the coupons an annuity factor was used instead but the par value receivable at maturity was discounted using the discounting factor in the question.

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