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A company issues bonds with a par value of $800,000 on their issue date. The bonds mature in 5 years and pay 6% annual interest in two semiannual payments. On the issue date, the market rate of interest is 8%. Compute the price of the bonds on their issue date. The following information is taken from present value tables:

Present value of annuity for 10 periods at 3%....8.5302
Present value of annunity 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

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Accounting Basics, Accounting

Category:- Accounting Basics
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