Sail Fish Inc.issued a $500,000, 8%, 10-year bond, with interest payable semi-annually to yield 6%.The issuance price of the bond was:

Question

Quizplus · Accepted Answer

To find the issuance price of the bond, we can use the formula:
PV = (C/r) x [1 - (1/1+r)^n] + FV/(1+r)^n
where PV is the present value or issuance price of the bond, C is the semi-annual coupon payment, r is the semi-annual interest rate, n is the number of semi-annual periods or years, and FV is the face value or maturity value of the bond.

In this case, C = 0.08 x 500,000/2 = 20,000, r = 0.06/2 = 0.03, n = 10 x 2 = 20, and FV = 500,000. Substituting the values, we get:
PV = (20,000/0.03) x [1 - (1/1.03)^20] + 500,000/(1.03)^20
PV = $574,387. Therefore, the best choice is D, as it is the only option that matches the calculated value.