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Agata [3.3K]
3 years ago
13

Madison Corporation is authorized to issue $500,000 of 5-year bonds dated June 30, 2016, with a stated rate of interest of 11%.

Interest on the bonds is payable semiannually, and the bonds are sold on June 30, 2016.
Required:
Determine the proceeds that the company will receive if it sells the following:
1. The bonds to yield 12% $
2. The bonds to yield 10% $
Business
1 answer:
Arada [10]3 years ago
5 0

Answer and Explanation:

The computation is shown below:

1.

<u>Particulars             Amount          PV factor at 6% for 10 years         Present value </u>

Semi-annual interest $27,500       7.360087       $202,402.39

                                ($500,000 × 11% ÷ 2)

Principal                   $500,000       0.558395       $279,197.50

Total                                                                        $481,599.89

2.

<u>Particulars             Amount          PV factor at 5% for 10 years         Present value </u>

Semi-annual interest $27,500        7.721735   $212,347.71

                                ($500,000 × 11% ÷ 2)

Principal                   $500,000        0.613913   $306,956.5

Total                                                                        $519,304.21

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