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Galway Bay Enterprises: compute the present value of a bond

Please explain how to compute the present value of a bond?

Galway Bay Enterprises issued 10%, 8-year, $2,000,000 par value bonds that pay intrest semiannually on October 1 and April 1. The bonds are dated April 1, 2002, and are issued on that date. The discount rate of interest for such bonds on April 1, 2002, is 12%. What cash proceeds did Galway Bay receive from issuance of the bond?

Solution Summary

The solution shows all the calculations to arrive at the amount of cash proceeds from the issuance of the bond.