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 calculate the total issue price of the bonds, we need to use the present value factor and the formula for present value of an annuity:

PV = PMT x [(1 - (1 / (1 + i)n)) / i]

Where PV is the present value, PMT is the annual payment, i is the effective-interest rate, and n is the number of periods.

In this case, the PMT is ¥2,400,000 (which is calculated by taking the face amount of ¥30,000,000 and multiplying it by the contract rate of 8%). The effective-interest rate is 10%, and the bonds have a 10-year term, so n is 10.

Using the present value factor of 7.3601 from the table, we can calculate the present value of the annuity:

PV = ¥2,400,000 x [(1 - (1 / (1 + 0.10)10)) / 0.10] x 7.3601
PV = ¥2,400,000 x [6.1446] x 7.3601
PV = ¥107,807,248

Therefore, the total issue price of the bonds was ¥26,328,000 (which is calculated by dividing the present value by the face amount). The correct answer is D.