Problem -
Lopes Inc. issued bonds with a face value of $300,000 on January 1, Year1. The bonds have a 10 year maturity. The bonds will pay annual interest at 5% at the end of every year. On the date the bonds were issued, the market rate of interest was 4%. What will be the issue price of the bonds?
A. $202,668
B. $276,834
C. $300,000
D. $318,630
E. $324,332
Will the bond in the immediately preceding problem be issued at a premium ,discount, or face value. (If you are unsure of the math in the first question, this is a chance to get some credit just by looking at the circumstances in the problem.)
1. A. Face Value
2. B. Discount
3. C. Premium