M10-5 Computing the Price of a Bond Issued at a Discount LO10-4 Tre Company plan

Question

M10-5 Computing the Price of a Bond Issued at a Discount LO10-4 Tre Company plans to issue bonds with a face value o S904,50 and a coupon rate 6 percent. The bonds will mat e in 10 ears and pay interes sem annua y every June and December 3 1 of he 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 8.5 percent. price

Explanation / Answer

Issue price of bonds = Present value of interest+Present value of maturity payment

= (904500*3%*13.2944)+(904500*0.4350)

Issue price of bonds = 754201

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