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    Selling price of the bonds

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    I am having trouble with bonds.

    Messier Inc. manufactures cycling equipment. Recently the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company's bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $3,000,000 of 11% term corporate bonds on March 1, 2010, due on March 1, 2025, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%.

    Instructions: As the controller of the company, determine the selling price of the bonds.

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    The selling price of the bonds is the present value of interest and principal discounted at the market rate of interest. The semi annual interest paid on the bonds ...

    Solution Summary

    The solution explains how to determine the selling price of the bonds