On January 2, 2010, Barham Corporation issued ten-year bonds payable with a face value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield a market interest rate of 10 percent. Interest is payable semiannually on January 2 and July 1. In calculating the present value of the bond issue on January 2, 2010,

Question

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The market interest rate of 10% is divided by 2 for semiannual periods, resulting in a 5% rate used to calculate the present value of both the face amount and the periodic interest payments.

On January 2, 2010, Barham Corporation Issued Ten-Year Bonds Payable