Question

On January 1, 2021, Anne Teak Furniture issued $100,000 of 12% bonds, dated January 1. Interest...

On January 1, 2021, Anne Teak Furniture issued $100,000 of 12% bonds, dated January 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in 4 years. The annual market rate for bonds of similar risk and maturity is 14%. What was the issue price of the bonds? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

a. $89,460

b. $95,460

c. $94,029

d. $120,942

Homework Answers

Answer #1
Answer

Amount

PV factor 7% Present value
Semiannual interest 6000 5.97130 $        35,828
Principal 100000 0.58201 $        58,201
Total $        94,029
Option C $94,029 is correct
PV factor 6%:
Semiannual interest 5.97130 (1-(1.07)^-8)/0.07
Principal 0.58201 1/1.07^8
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