Use the following information for questions 19-20.
On January 1, 2020, Cotton Corp. issued eight-year, 3% bonds with a face value of $ 600,000, with interest payable semi-annually on June 30 and December 31. The bonds were sold to yield 4%. Table values are:

Present value of 1 for 8 periods at $ 3 \% $ $~~~~~~~~$ $~~~~~~~~$ $~~~~~~~~$ .789
Present value of 1 for 8 periods at $ 4 \% $ $~~~~~~~~$ $~~~~~~~~$ $~~~~~~~~$ .731
Present value of 1 for 16 per iods at $ 1.5 \% $$~~~~~~~~$ $~~~~~~~~$ $~~~~$ .788
Present value of 1 for 16 per iods at $ 2 \% $ $~~~~~~~~$ $~~~~~~~~$ $~~~~~~$ .728
Present value of annuity for 8 periods at $ 3 \% $ $~~~~~~~~$ $~~~~~~~~$ $~$ 7.020
Present value of annuity for 8 periods at $ 2 \% $ $~~~~~~~~$ $~~~~~~~~$ $~$ 7.325
Present value of annuity for 16 periods at $ 1.5 \% $ $~~~~~~~~$ $~~~~~$ 14.131
Present value of annuity for 16 periods at $ 2 \% $ $~~~~~~~~$ $~~~~~~~~$ 13.578

-The present value of the interest is

Question

Use the following information for questions 19-20.
On January 1, 2020, Cotton Corp. issued eight-year, 3% bonds with a face value of $ 600,000, with interest payable semi-annually on June 30 and December 31. The bonds were sold to yield 4%. Table values are: 
 
Present value of 1 for 8 periods at $ 3 \% $ $~~~~~~~~$ $~~~~~~~~$ $~~~~~~~~$ .789  
Present value of 1 for 8 periods at $ 4 \% $ $~~~~~~~~$ $~~~~~~~~$  $~~~~~~~~$ .731  
Present value of 1 for 16 per iods at $ 1.5 \% $$~~~~~~~~$ $~~~~~~~~$  $~~~~$  .788  
Present value of 1 for 16 per iods at $ 2 \% $ $~~~~~~~~$ $~~~~~~~~$  $~~~~~~$ .728 
Present value of annuity for 8 periods at $ 3 \% $ $~~~~~~~~$  $~~~~~~~~$ $~$ 7.020  
Present value of annuity for 8 periods at $ 2 \% $ $~~~~~~~~$  $~~~~~~~~$ $~$ 7.325  
Present value of annuity for 16 periods at $ 1.5 \% $ $~~~~~~~~$  $~~~~~$ 14.131  
Present value of annuity for 16 periods at $ 2 \% $ $~~~~~~~~$ $~~~~~~~~$  13.578
 
-The present value of the interest is

Quizplus · Accepted Answer

The present value of the interest is $122,202. This is because the interest is paid at the end of each year, so the present value of the interest is the sum of the present values of each year's interest payment. The present value of each year's interest payment is calculated by multiplying the interest payment by the discount factor for that year. The discount factor is the present value of $1 received at the end of that year. The discount factor for year 1 is 1/(1+r), where r is the interest rate. The discount factor for year 2 is 1/(1+r)^2, and so on.

Use the Following Information for Questions 19-20 3% 3 \% 3%

Use the Following Information for Questions 19-20 $3 \%$