Question

Help Save & Exit Submit On January 1, 2021, Anne Teak Furniture issued $100,000 of 10% bonds, dated January 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in 11 years. The annual market rate for bonds of similar risk and maturity is 12%. What was the issue price of the bonds? (FV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Answer 1

Answer :- Calculation of the issue price of bonds :-

Semiannual = 10%/2 = 5%, 12%/2 = 6%

$100,000 *5% = $5,000

$5,000 * 12.04158* = $60,208

$100,000 * 0.277505** = $27,751

Issue Price = $87,959

*PV of ordinary annuity of $1 : n= 22, i= 6%

**PV of $1 : n = 22, i= 6%

so the issue price of bonds is $87,959 therefore the correct answer is option B.( $87,959).

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