On Janaury 1, 2014, Huntington Corporation issued eight year bonds with a face v
ID: 2458547 • Letter: O
Question
On Janaury 1, 2014, Huntington Corporation issued eight year bonds with a face value of $8,000,000 and a stated interest rate of 6%, payable semiannualy on June 30 and December 31. The bonds were sold to yield 8%. Table values are:
Present value of 1 for 8 periods at 6%.......... .627
Present value of 1 for 8 periods at 8%.......... .540
Present value of 1 for 16 periods at 3%........ .623
Present value of 1 for 16 periods at 4%........ .534
Present value of an annuity for 8 periods at 6%... 6.210
Present value of an annuity for 8 periods at 8%... 5.747
Present value of an annuity for 16 periods at 3%... 12.561
Present value of an annuity for 16 periods at 4%... 11.652
What is the issue price of the bonds?
a) $8,990,400
b) $7,360,000
c) $7,078,560
d) $7,068,480
Explanation / Answer
semi annual coupon interest = $8000000 x 3% = 240000
Issue price = 240000 x 11.652 + 8000000 x 0.534
= $7068480
Thus answer will be d).
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.