A company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest in semiannual payments. The annual market rate for the bonds is 6%. Compute the price of the bonds on their issue date. The following information is taken from present value tables: Present value of an annuity (series of payments) for 18 periods at 3% Present value of an annuity (series of payments) for 10 periods at 4% Present value of 1 (single sum) due in 10 periods at 3% Present value of 1 (single sum) due in 10 periods at 4% Table Values and on 8.5302 8.1109 0.7441 0.6756

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest in semiannual
payments. The annual market rate for the bonds is 6% Compute the price of the bonds on their issue date. The following information
is taken from present value tables:
Present value of an annuity (series of payments) for 10 periods at 3%
Present value of an annuity (series of payments) for 10 periods at 4%
Present value of 1 (single sum) due in 10 periods at 3%
Present value of 1 (single sum) due in 10 periods at 4%
Table Values are Based on:
n=
Cash Flow
Par (maturity) value
Interest (annuity)
Price of bonds
Table Value
Amount
Present Value
8.5302
8.1109
0.7441
0.6756
Transcribed Image Text:A company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest in semiannual payments. The annual market rate for the bonds is 6% Compute the price of the bonds on their issue date. The following information is taken from present value tables: Present value of an annuity (series of payments) for 10 periods at 3% Present value of an annuity (series of payments) for 10 periods at 4% Present value of 1 (single sum) due in 10 periods at 3% Present value of 1 (single sum) due in 10 periods at 4% Table Values are Based on: n= Cash Flow Par (maturity) value Interest (annuity) Price of bonds Table Value Amount Present Value 8.5302 8.1109 0.7441 0.6756
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