Question

Sunland Company is about to issue $262,700 of 6-year bonds paying an 9% interest rate, with interest payable semiannually. The discount rate for such securities is 8%.
Required:
In this case, how much can Sunland expect to receive from the sale of these bonds?

Answer 1

Answer:

Amount from sale of bonds  $275,028

Explanation:

The computation is shown below;

Particulars      Amount        PV factor       Present value of cash flows

Interest            $11,821.50   9.38507        $1,10,946

            ($262,700 × 0.09 × 6 ÷ 12)

Principal          $262,700   0.6246         $164,082

Amount from sale of bonds                    $275,028