Heather Corporation issued $2,000,000, 10-percent, 10-year bonds on January 2, Year 2.The bonds pay interest semiannually on January 1 and July 1.The bonds were priced on the market to yield 8 percent.
Refer to the Heather Corporation example.The issue price of the bonds is calculated as follows:

Question

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The bonds are priced to yield 8% annually, which is 4% semiannually. The issue price is the present value of the face value ($2,000,000) discounted at 4% for 20 periods, plus the present value of the semiannual interest payments ($100,000) discounted at 4% for 20 periods.

Heather Corporation Issued $2,000,000, 10-Percent, 10-Year Bonds on January 2