A company issues bonds with a par value of $400,000. The bonds mature in 5 years and pay 10% annual interest in semiannual payments. The annual market rate for the bonds is 8%. 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 4% Present value of an annuity (series of payments) for 10 periods at 5% Present value of 1 (single sum) due in 10 periods at 4% Present value of 1 (single sum) due in 10 periods at 5% Table Values are Based on: j= Cash Flow Par (maturity) value Interest (annuity) Price of bonds 10 4.0% Table Value Amount Present Value $ 0.00 8.1109 7.7217 0.6756 0.6139

A company issues bonds with a par value of $400,000. The bonds mature in 5 years and pay 10% annual interest in semiannual payments. The annual market rate for the bonds is 8%. 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 4% Present value of an annuity (series of payments) for 10 periods at 5% Present value of 1 (single sum) due in 10 periods at 4% Present value of 1 (single sum) due in 10 periods at 5% Table Values are Based on: j= Cash Flow Par (maturity) value Interest (annuity) Price of bonds 10 4.0% Table Value Amount Present Value $ 0.00 8.1109 7.7217 0.6756 0.6139

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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