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    Calculating the issue price of bonds

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    On January 1, 2014, Marino Corporation issued eight year bonds with a face value of $5,000,000 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 an annuity for 8 periods at 6%........................ 6.210
    Present value of an annuity for 8 periods at 8%........................ 5.747
    Present value of an annuity for 16 periods at 3%........................ 12.561
    Present value of an annuity for 16 periods at 4%........................ 11.652

    What is the issue price of the bonds?

    a. $4,417,800
    b. $4,424,100
    c. $4,600,000
    d. $5,619,000

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    https://brainmass.com/business/annuity/calculating-the-issue-price-of-bonds-498824

    Solution Preview

    Semi annual interest payment=5000000*6%/2=$150000

    PV of interest payments=Semi annual interest payment*Present value of an annuity for 16 ...

    Solution Summary

    Solution describes the steps to estimate the issue price of the bonds in the given case.

    $2.19