This Question: 1 pt 16 of 21 (0 complete) ? | This Quiz: 25 pts possible On Janu

Question

This Question: 1 pt 16 of 21 (0 complete) ? | This Quiz: 25 pts possible On January 1, 2017, bonds with a face value of $123,000 were sold. The bonds mature on January 1, 2027. The face interest rate is 10% annually. The bonds pay interest semiannually on July 1 and January 1. The market rate of interest is 8% annually. What is he market price of the bonds? The present value of S for 20 pero s at 5% is 31. The present value a anor nan annuity of r ) periods at 5% is 12.462. The present value of $1 for 10 periods at 8% is 0.508. The present value of an ordinary annuity of $1 for 10 periods at 8% is 6.71 Round your final answer to the nearest dollar. OA. $129,150 OB. $123,012. O c. $103,751. OD, $123,000

Explanation / Answer

Face value 123,000 interest (123,000*10%*1/2)= 6150 Calcuation of bond issue price where i= 5% t= 20 periods principal * PV of $1 123,000 * 0.508 = 62484 interest PV ordinary annuity 6,150 * 6.71 = 41267 103751 option C 103,751 answer the quiz set up is wrong in actual the 4% market rate is to be used . since interest is paid semi-annually other answer could be option B but that will be when we take 5% discount factor But both ways the question set up is wrong

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