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On January 1, a company issues bonds dated January 1 with a par value of $240,000....

On January 1, a company issues bonds dated January 1 with a par value of $240,000. The bonds mature in 3 years. The contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The market rate is 9%. Using the present value factors below, the issue (selling) price of the bonds is:

n= i= Present Value of an Annuity
(series of payments)		 Present value of 1
(single sum)
3 8.0 % 2.5771 0.7938
6 4.0 % 5.2421 0.7903
3 9.0 % 2.5313 0.7722
6 4.5 % 5.1579 0.7679

Multiple Choice

  • $246,188.

  • $233,812.

  • $240,000.

  • $49,516.

  • $184,296.

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Answer #1
n= 6 =3*2
i= 4.5% =9%/2
Cash interest 9600 =240000*8%/2
Amount PV factor 4.5% Present value
Cash interest 9600 5.1579 49516
Principal 240000 0.7679 184296
233812
Option B $233,812 is correct
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