Price of bonds
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On January 1, a company issues bonds with a par value of $300K. The bonds mature in 5 yrs and pay 8% annual interest each on June 30 and December 31. On the issue date, the market rate of interest is 6%. Compute the price of the bonds on their issue date.
- Present value of annuity for 10 periods at 3%=8.5302
- Present value of 1 due in 10 periods at 3%= 0.7441
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Solution Summary
The solution explains how to calculate the price of bonds on the issue date based on the par value-annuity.
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The price of the bond would be the present value of interest and principal discounted at the market rate of interest. The bonds pay semi annual interest which is ...
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