On January 2,20x5,Fresh Inc.issued 20-year bonds payable with a face value of $1,000,000 and a face interest rate of 10 percent.The bonds were issued to yield a market interest rate of 9 percent.Interest is payable semi-annually on January 1 and July 1.In calculating the present value of the bond issue of January 2,20x5,the factor used to calculate the present value of the $1,000,000 is

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Since the bonds have a semi-annual interest payment and were issued to yield a market interest rate of 9% annually, the effective interest rate per period is 4.5% (half of 9%). The bonds have a 20-year maturity, resulting in 40 periods (20 years * 2 periods per year). Therefore, the correct factor for calculating the present value of the bond issue is 4.5%, 40 periods.