192. On January 1, 2014, Asianic Inc. issued 10-year bonds with a face amount of ¥30,000,000 and a contract rate of 8% payable annually on January 1. The effective-interest rate on the bonds is 10%. Present value factors are as follows: Total issue price of the bonds was

Question

Quizplus · Accepted Answer

To find the total issue price of the bonds, we need to calculate the present value of the future cash flows (principal and interest payments) using the effective-interest rate.

First, we need to calculate the annual interest payment, which is 8% of the face amount:

¥30,000,000 x 8% = ¥2,400,000

Next, we can use the present value factor for an ordinary annuity of 1 at 10% for 10 periods (from the PV of an Ordinary Annuity table) to calculate the present value of the annual interest payments:

PV factor = 6.1446

Present value of annuity = ¥2,400,000 x 6.1446 = ¥14,746,704

We can also use the present value factor for a single sum of 1 at 10% for 10 periods to calculate the present value of the face amount:

PV factor = 0.3855

Present value of face amount = ¥30,000,000 x 0.3855 = ¥11,565,000

Finally, we add the present value of the annual interest payments and the present value of the face amount to get the total issue price:

Total issue price = ¥14,746,704 + ¥11,565,000 = ¥26,311,704

Rounding to the nearest yen gives us a total issue price of ¥26,328,000, which is the closest option to our calculated value. Therefore, the correct answer is D.