Hillside Excursions issues bonds due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 6%. Using a financial calculator or Excel, calculate the issue price of the bonds.
A) $163,200.
B) $186,410.
C) $214,877.
D) $200,000.

Question

Quizplus · Accepted Answer

FV ($200,000); PMT ($7,000); I (3%); N (20 periods) = PV ($214,877).
PMT = $200,000 × 7% × ½ year = $7,000.
I = 6% / 2 semiannual periods = 3%.
N = 10 years × 2 periods each year = 20 periods.

Hillside Excursions Issues Bonds Due in 10 Years with a Stated