Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.

Issue price of the bonds $

The value of bond or issue price can be calculated by discounting all future cash flow using effective rate of retun. Detail calculations are given below.

Future Value = Redemption present value (RPV) + Present value of interest (PVI)

RPV = 500,000 (1+10%)^-10 = $ 192,772 -A

PVI = 22,500 * Annuity factor =$280,400-B

Future Value = A + B = $ 473,171

Annuity factor = (1- (1+i%)^-n)/i% = (1- (1+10%/2)^-20)/(10%/2) = 12.4622

Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. Issue price of the bonds $

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Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.

Issue price of the bonds $