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weeeeeb [17]
3 years ago
11

On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 3 years. The contract rat

e is 4%, and interest is paid semiannually on June 30 and December 31. The market rate is 5%. Using the present value factors below, the issue (selling) price of the bonds is:
Business
1 answer:
Alexandra [31]3 years ago
5 0

Answer:

b. $194,492

Explanation:

Note: The  present value factors is attached as picture below

Multiple Choice <em>$205,607.  $194,492.  $200,000.  $22,032.  $172,460.</em>

<em>00,000 </em>

Calculation of Bond issue price                        

                                                           PV factor at 2.50%

Pv value of bond               200,000             0.8623                 172,460

Pv of interest at 2%, 6       4,000                  5.5081                  <u>22,032</u>

semi annual installment

Present value of the Bond                                                        <u>$194,492</u>

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