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Par Value Bonds

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A company issued 10%, 8-year, $2,000,000 par value bonds that pay interest 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 the company receive from issuance of the bonds?

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We need to find the present value (PV) to find the cash proceeds received from the issuance of bonds. First of all in order to to evaluate semiannual payment bonds, we must do the following:

- Divide interest (discount rate) by 2 to determine the dollars of interest paid each six months.

- Multiply the years to ...

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Umut Oltulu, MBA
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  • MBA, Texas A&M University-Kingsville
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