Present Value of Bond
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On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest each 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. The following information is taken from present value tables:
Present Value of an annuity for 10 periods at 3% 8.5302
Present Value of 1 due in 10 periods at 3%
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Solution Summary
The solution solves a problem: Present alue of a bond using the present value formula and present value table.
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Finding the price of a bond is the same as finding the present value of a bond. Formula for present value of a bond is:
FV*(PVIF) : Where FV is thje par value and PVIF is the Present value factor. The PVIF is either given in a table or ...
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