Question

Sand Explorers issues bonds due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. Using present value tables, calculate the issue price of the bonds.

Answer 1

Answer:

The issue price of the bonds is $186412.10.

Explanation:

Price of bond = coupon×PVIFA(n,i) + FV ×PVIF(n,i)

                       = 7000×PVIFA(20 , 4%) + 200000×PVIF(20 , 4%)

                       = 7000×13.5903 + 200000×0.4564

                       = $186412.10

Therefore, the issue price of the bonds is $186412.10.