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# Bond Issues and Present Value of Money

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1.
Limeway Company issues \$5,000,000, 6%, 5-year bonds dated January 1, 2007 on January 1, 2007. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
2.5% 3% 5% 6%

Present value of a single sum for 5 periods .88385 .86261 .78353 .74726

Present value of a single sum for 10 periods .78120 .74409 .61391 .55839

Present value of an annuity for 5 periods 4.64583 4.57971 4.32948 4.21236

Present value of an annuity for 10periods 8.75206 8.53020 7.72173 7.36009

A.) \$5,000,000
B.)\$5,216,494
C.) \$5,218,809
D.)\$5,217,308

2.

On January 1, 2007, Bleeker Co. issued eight-year bonds with a face value of \$1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are:

Present value of 1 for 8 periods at 6%.. .... .627
Present value of 1 for 8 periods at 8%.. .... .540
Present value of 1 for 16 periods at 3%.. .... .623
Present value of 1 for 16 periods at 4%.. .... .534
Present value of annuity for 8 periods at 6%.. .. 6.210
Present value of annuity for 8 periods at 8%.. .. 5.747
Present value of annuity for 16 periods at 3%.. 12.561
Present value of annuity for 16 periods at 4%.. 11.652

The present value of the principal is:

\$534,000.
\$540,000.
\$623,000.
\$627,000.

#### Solution Preview

1.

Limeway Company issues \$5,000,000, 6%, 5-year bonds dated January 1, 2007 on January 1, 2007. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
2.5% 3% 5% 6%

Present value of a single sum for 5 periods .88385 .86261 .78353 .74726

Present value of a single sum for 10 periods .78120 .74409 .61391 .55839

Present ...

#### Solution Summary

The solution examines bond issues and the present value of money.

\$2.49