Oleary Corporation is issuing $600,000 of 8%, 5-year bonds when potential bond i

Question

Oleary Corporation is issuing $600,000 of 8%, 5-year bonds when potential bond investors want a return of 10%. Interest is payable semiannually.

The present value of 1 factors are 4%, .67556 and 5%, .61391. The present value of an annuity factors are 4%, 8.1109 and 5%, 7.72173.

Instructions

Compute the market price (present value) of the bonds.

Please provide full details Gracias...

Oleary Corporation is issuing $600,000 of 8%, 5-year bonds when potential bond investors want a return of 10%. Interest is payable semiannually. The present value of 1 factors are 4%, .67556 and 5%, .61391. The present value of an annuity factors are 4%, 8.1109 and 5%, 7.72173. Instructions Compute the market price (present value) of the bonds.

Explanation / Answer

semiannual rate = 10/2 = 5 %

PV = 600,000*(0.04/(1.05) + 0.04/1.05^2 + .......1.04/1.05^10)

PV = $553,669.59

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