Computing Bond Issue Price Bushman, Inc., issues $200,000 of 9% bonds that pay i

Question

Computing Bond Issue Price

Bushman, Inc., issues $200,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is:

a. 6% per year compounded semiannually.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)

b. 8% per year compounded semiannually.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)

Present value of principal repayment $Answer Present value of interest payments $Answer Selling price of bonds $Answer

Explanation / Answer

a Present value of principal repayment 133897 =9000*14.87747 Present value of interest payments 110736 =200000*0.55368 Selling price of bonds 244633 b Present value of principal repayment 122313 =9000*13.59033 Present value of interest payments 91278 =200000*0.45639 Selling price of bonds 213591

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