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    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 Preview

    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 ...

    Solution Summary

    The solution explains how to calculate the price of bonds on the issue date based on the par value-annuity.