Question

ABC issues 6%, 10 year bonds with a face amount of $100,000. The market interest rate for bonds of similar risk and maturity is 4%. Interest is paid semiannually. At what price will the bonds issue?

		116,222
		116,351
		117,155
		116,024
		115,873

Answer 1

Computation Of Bond Price
a	Annual Interest Amount	$                 6,000.00
	($100000*6%)
b	PV Annuity Factor for (10 Years,4%)	8.110896
c	Present Value Of Annual Interest (a*b)	$              48,665.37
d	Redemption Value	$            100,000.00
e	PV Factor Of (10 Years,4%)	0.67556
g	Present Value Of Redemption Amount (d*e)	$              67,556.42
f	Value   Of The Bond (c+g)	$                  116,222