A company issues bonds with a par value of $300,000 on their issue date 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 in 10 periods at 4% ……………….0.6756

present value of principal
(300,000x.6756) 202,630
present value of interest
(300,000x4%x8.1109) 72,998
PRICE OF BONDS 275,628