FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
On January 1, 2021, Battersea issued $200,000 of 8% bonds, dated January 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in 10 years. The annual market rate for bonds of similar risk and maturity is 10%. What was the issue price of the bonds?
Question 29 options:
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$171,222 |
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$175,076 |
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$175,900 |
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$87,538 |
Expert Solution
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FORMULA
Issue price of bonds = Present value of interest + Present value of maturity
PV of annuity of $1
( i = 5% , n = 20)
= 12.46221
PV of $1
( i = 5% , n = 20 )
= 0.37689
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