Darlene & Joe Company issues bonds with a par value of $1,800,000 on their issue date. The bonds mature in 5 years and pay 6% annual interest in semiannual payments. On the issue date, the market rate of interest (annual) is 8%.
Compute the price of the bonds on their issue date. (The answer assumes the use of a financial calculator. (If PV tables are used, select the closest answer from the options provided.)

Question

Quizplus · Accepted Answer

11ee7640_e1c3_e459_90da_29cbe4c00762_TBCB1007_00 N = (5 x 2) = 10 I = (8% / 2) = 4
Semi-annual interest payments: $1,800,000 x (0.06 x 1/2) = $54,000

Darlene & Joe Company Issues Bonds with a Par Value