On January 1,2009,Jason Company issued $5 million of 10-year bonds at a 10% stated interest rate to be paid annually.The following present value factors have been provided:

$$\begin{array}{lccl }
\begin{array} { lccl }
\text { Time Period } & \text { Interest } \
10 & 10 \% \
10 & 8 \% \
10 & 12 \%
\end{array}
\begin{array} { lcc l }
\text { PV of } \$ & \text { PV of an } \text { Annuity } \
.386 & 6.145 \
.463 & 6.710 \
.322 & 5.650
\end{array}
\end{array}$$
Calculate the issuance price if the market rate of interest was 10%.
A)$5,427,000
B)$4,477,000
C)$4,435,000
D)$5,000,000

Question

On January 1,2009,Jason Company issued $5 million of 10-year bonds at a 10% stated interest rate to be paid annually.The following present value factors have been provided:

$$\begin{array}{lccl }
\begin{array} { lccl  } 
\text { Time Period } & \text { Interest } \
10 & 10 \% \
10 & 8 \% \
10 & 12 \%
\end{array}
\begin{array} { lcc l } 
\text { PV of } \$  & \text { PV of an } \text { Annuity } \
.386 & 6.145 \
.463 & 6.710 \
.322 & 5.650
\end{array}
\end{array}$$
 Calculate the issuance price if the market rate of interest was 10%.
A)$5,427,000
B)$4,477,000
C)$4,435,000
D)$5,000,000

Quizplus · Accepted Answer

The issuance price of the bonds is equal to the face value of $5 million because the market rate of interest is equal to the stated interest rate of 10%.

On January 1,2009,Jason Company Issued $5 Million of 10-Year Bonds