Answer
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 |
10.0% |
5.0% |
Coupon Rate |
9.0% |
4.5% |
Face Value |
$ 500,000.00 |
Term (in years) |
10 |
Total no. of interest payments |
20 |
Amount |
PV factor |
Present Values |
|
PV of Face Value of |
$ 500,000.00 |
0.37689 |
$ 188,445.00 |
PV of Interest payments of |
$ 22,500.00 |
12.46221 |
$ 280,399.73 |
Issue Price of Bonds |
$ 468,844.73 |
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