On January 1,2014,bonds with a face value of $100,000 were sold.The bonds mature on January 1,2024.The stated rate of interest is 9% annually.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10% annually.What is the market price of the bonds? The present value of 1 for 20 periods at 5% is 0.377.The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462.The present value of 1 for 10 periods at 10% is 0.386.The present value of an ordinary annuity of $1 for 10 periods at 10% is 6.145.

Question

Quizplus · Accepted Answer

The market price of the bonds is calculated using the present value of the interest payments and the present value of the face value. The semiannual interest payment is $4,500 ($100,000 * 9% / 2). The present value of the annuity (interest payments) is $4,500 * 12.462 = $56,079. The present value of the face value is $100,000 * 0.377 = $37,700. The total market price is $56,079 + $37,700 = $93,779.

On January 1,2014,bonds with a Face Value of $100,000 Were