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issue price of the bond.
Pharoah Corporation issues $450,000 of 8% bonds, due in 9 years, with interest payable semiannually. At the time of issue, th
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Answer #1

Calculation of Bond Price

Issue Price = $ 4,50,000

Market Rate is 10% & Bond Rate is 8%.

Tenure of Bond is 9 years.

Interest will be paid semi annually.

Cost of Bond = Issue Price * PVIF(10%, 9) + Interest * PVIFA(5%,18)

= 4,50,000 *  PVIF(10%,9) + 18,000 * PVIFA(5%,18)

= 4,50,000 * 0.4241 + 18,000 * 11.6896

= 1,90,845 + 2,10,413

= 4,01,258

Issue Price of Bond = $ 4,01,258

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