Price of bonds if contract rate different from market rate
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If the interest rate is 10% and a company issued $80,000,14%, 4-year bonds that pay interest semiannually. What is the selling price pf bonds issue
How would I start this problem off, is their a certain method to use since it says semiannually?
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Solution Summary
The solution explains how to calculate the issue price of bonds if the contract rate on bonds is different from the market rate at the time the bonds are issued.
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The selling price of the bond is the present value of interest and principal, discounted at the market rate.
The bonds have a face value (principal) amount of $80,000 and pay interest of 14%. The annual interest is 80,000X14%=11,200. Since the interest is paid semi ...
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