On January 1, 2021, Battersea issued $200,000 of 8% bonds, dated January 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in 10 years. The annual market rate for bonds of similar risk and maturity is 10%. What was the issue price of the bonds? Question 29 options: $171,222 $175,076 $175,900 $87,538
On January 1, 2021, Battersea issued $200,000 of 8% bonds, dated January 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in 10 years. The annual market rate for bonds of similar risk and maturity is 10%. What was the issue price of the bonds? Question 29 options: $171,222 $175,076 $175,900 $87,538
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, 2021, Battersea issued $200,000 of 8% bonds, dated January 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in 10 years. The annual market rate for bonds of similar risk and maturity is 10%. What was the issue price of the bonds?
Question 29 options:
|
|
$171,222 |
|
|
$175,076 |
|
|
$175,900 |
|
|
$87,538 |
Expert Solution
FORMULA
Issue price of bonds = Present value of interest + Present value of maturity
PV of annuity of $1
( i = 5% , n = 20)
= 12.46221
PV of $1
( i = 5% , n = 20 )
= 0.37689
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