Answer :-
The correct answer is option C - $371,008
Explanation :-
Face Value of Bond = $400,000
Interest rate = 8%
Coupon = $400,000 × 8% × 1/2= 16,000
Market Rate = 9%
Semi annual market rate (i) = 9%/2 = 4.5%
n = 12 years × 2 each year = 24
Issue Price of bond = coupon×PVIFA(n,i) + Face value of bond
×PVIF(n,i)
Issue Price of Bond = $16,000×PVIFA(24 , 4%.5) + $400,000 × PVIF(24
, 4.5%)
Issue Price of bond = $16,000×14.4955 +
$400,000×0.3477
Issue Price of bond = $371,008
Therefore, the issue price of the bonds is $371,008
PVIFA (n,i) = {1 - (1 + r)-n-n } / r
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