Bushman, Inc., issues $400,000 of 9% bonds that pay interest semiannually and ma

Question

Bushman, Inc., issues $400,000 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. 6% per year compounded semiannually.

b. 8% per year compounded semiannually.

Present value of principal repayment (0.55368*400000) 221472 Present value of interest payments (14.87747*18000) 267794 Selling price of bonds 489266

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