Marwick Corporation issues 8%,5-year bonds with a par value of $1,000,000 and semiannual interest payments.On the issue date,the annual market rate for these bonds is 6%.What is the bond's issue (selling)price,assuming the following Present Value factors:
A)$1,000,000
B)$789,244
C)$1,341,208
D)$1,085,308
E)$658,792

Question

Marwick Corporation issues 8%,5-year bonds with a par value of $1,000,000 and semiannual interest payments.On the issue date,the annual market rate for these bonds is 6%.What is the bond's issue (selling)price,assuming the following Present Value factors: 
A)$1,000,000 
B)$789,244 
C)$1,341,208 
D)$1,085,308 
E)$658,792

Quizplus · Accepted Answer

Using the present value table given:
PV factor for 5 years at 6% = 0.74726
PV factor for 4.5 years at 4% = 0.78099
Total PV factor = 1.52825

Bond issue price = PV factor x Par value
= 1.52825 x $1,000,000
= $1,085,308

Therefore, the answer is D, $1,085,308.

Marwick Corporation Issues 8%,5-Year Bonds with a Par Value of $1,000,000