Question:
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 an annuity for 10 periods at 4%.....8.1109
Present value of 1 due in 10 periods at 3%............0.7441
Present value of 1 due ub 10 periods at 4%...........0.6756