When the market rate of interest was 12%, Halprin Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was
A) $321,970
B) $1,000,000
C) $943,494
D) $621,524

Question

Quizplus · Accepted Answer

To find the selling price of the bond issue, we need to use the present value formula:

P = PMT x (1 - 1/(1+r)^n)/r + FV/(1+r)^n

where:
P = selling price
PMT = annual payment
r = market rate of interest
n = number of periods
FV = future value

Plugging in the values, we get:

P = $110,000 x (1 - 1/(1+0.12)^10)/0.12 + $1,000,000/(1+0.12)^10
P = $943,494

Therefore, the selling price of the bond issue was $943,494. Choice C is correct.

When the Market Rate of Interest Was 12%, Halprin Corporation