Homework Answers
Annual interest payment = 2,700,000 x 7%
= $189,000
Present value of principal to be received at maturity = Par value of bonds x PVF (i%, n)
= 2,700,000 x PVF (8%, 10)
= 2,700,000 x 0.46319
= $1,250,613
Present value of principal to be received periodically over the term of the bonds = Interest x PVAF (i%, n)
= 189,000 x PVAF (8%, 10)
= 189,000 x 6.71008
= $1,268,205
Amount received at the time of bond issued = Present value of principal to be received at maturity + Present value of principal to be received periodically over the term of the bonds
= 1,250,613 + 1,268,205
= $2,518,818
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