A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price?

Question

Quizplus · Accepted Answer

The selling price of the bonds is determined by the face value of the bonds, the stated rate of interest, the market rate of interest, and the bond life. In this case, all of this information is provided except for the face value of the bonds, which is not explicitly given but can be assumed to be $1,000 per bond based on common practice for 10-year, 6.8% bonds.

A Company Wishes to Issue $600,000 of 10-Year, 6