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    Important information about Issue price of bonds

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    1) Amstop Company issues $20,000,000 of 10-year, 9% bonds on March 1, 2007 at 97 plus accrued interest. The bonds are dated January 1, 2007, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

    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 below. What is the issue price of the bonds?

    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

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    Solution Preview

    1. Amount received for bonds = 20,000,00X0.97 = 19,400,000
    Amount received for interest for 2 months = 20,000,000X9%X2/12 = ...

    Solution Summary

    The solution explains how to calculate the issue price of bonds

    $2.19

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