Question

Mind Explorers issues bonds with a stated interest rate of 8%, face value of $180,000, and due in 10 years. Interest payments are made semi- annually. The market rate for this type of bond is 7%. Using present value tables, calculate the issue price of the bonds. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $192,792. $180,000 oooo $146,426. $167,769.

Answer 1

$180,000
Bond Price = Present value of Bond Face Value and Interest
n = 10 years i.e. 20 period
r = 8% annualy i.e 4% semi annualy
Face Value
$180,000 x PV of $1 4%, 20
$180,000 x 0.45639		$82,150
Interest
$7,200 x PVA of $1 4%, 20		$97,850
$7,200 x 13.59033
		$180,000