Trew Company plans to issue bonds with a face value of $908,500 and a coupon rat

Question

Trew Company plans to issue bonds with a face value of $908,500 and a coupon rate of 6 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answers to nearest whole dollar amount.)

Determine the issuance price of the bonds assuming an annual market rate of interest of 7.5 percent.

Explanation / Answer

PVIFA Factor at I=3.75% and N=20   = 13.89620

PV of $1 at I=3.75% and N=20     = 0.47889

Interest semiannually   = 27,255

Issuance price of the bonds = (27255*13.89620)+(908500*0.47889) = $812,812.5

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