M10-8 Computing the Price of a Bond Issued at a Premium LO10-5 Waterhouse Compan

Question

M10-8 Computing the Price of a Bond Issued at a Premium LO10-5 Waterhouse Company plans to issue bonds with a face value of $503,500 and a coupon rate of 8 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 answer to whole dollars.) Determine the issuance price of the bonds assuming an annual market rate of interest of 6 percent. price

Explanation / Answer

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

= (503500*4%*14.8775)+(503500*0.5537)

Issue price of bonds = 578421

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