OPTION: $296,057
EXPLANATION:
Issue price of bond = present value of principal value on bond + present value of interest on bond
= ($280,000 x 0.31180) + ($18,200 x 11.46992)
= $87,304 + $208,752.54
= $296,057
where,
(1)
Coupon rate = 13%/2 = 6.5% semiannually
Annual interest on bond = $280,000 x 6.5% = $18,200
(2)
Market interest rate = 12%/2 = 6% semiannually
Time period = 10 x 2 = 20
Therefore,
PVF(6%, 20) = 0.31180
PVAF(6%, 20) = 11.46992
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1 question 2 parts
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