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

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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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