Answers
Answer
- Correct Answer = Option #1: $ 192,792
Amount | PV factor | Present Values | |
PV of Face Value of | $ 180,000.00 | 0.50257 | $ 90,462.60 |
PV of Interest payments of | $ 7,200.00 | 14.21240 | $ 102,329.28 |
Issue Price of Bonds | $ 192,791.88 |
- Concept
Bonds issue price is calculated by ADDING the: |
Discounted face value of bonds payable at 'applicable' market rate of interest [Face value x PV Factor], and |
Discounted Interest payments amount (during the lifetime) at 'applicable' market rate of interest [Interest payment x PV Annuity factor] |
Annual Rate | Applicable rate, because of Semi Annual payments | |
Market Rate | 7.0% | 3.5% |
Coupon Rate | 8.0% | 4.0% |
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