(1)
coupon interest rate semiannually = 7%/2 = 3.5%
interest on bond = $39,000,000 x 3.5% = $1365000
Issue price = present value of annual interest on bond x present value of principal value on bond
= ($1365000 x 13.59033) + ($39,000,000 x 0.45639)
= $18,550,800.45 + $17,799,210
= $36,350,010
where,
Market interest rate semiannually = 8%/2 = 4%
Number of period = 10 x 2 = 20
PVAF(4%,20) = 13.59033
PVF(4%,20) = 0.45639
(2)
The bond will issue at A discount
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