# Bond Issues and Present Value of Money

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.

https://brainmass.com/business/annuity/accounting-237185

#### 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.