On January 1, 2013, Ellison Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: Present value of 1 for 8 periods at 6%................................................ .627 Present value of 1 for 8 periods at 8%................................................ .540 Present value of 1 for 16 periods at 3%.............................................. .623 Present value of 1 for 16 periods at 4%.............................................. .534 Present value of annuity for 8 periods at 6%...................................... 6.210 Present value of annuity for 8 periods at 8%...................................... 5.747 Present value of annuity for 16 periods at 3%.................................... 12.561 Present value of annuity for 16 periods at 4%.................................... 11.652 The issue price of the bond is a.$889,560 b.$999,600 c.$883,560 d.$884,820
On January 1, 2013, Ellison Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: Present value of 1 for 8 periods at 6%................................................ .627 Present value of 1 for 8 periods at 8%................................................ .540 Present value of 1 for 16 periods at 3%.............................................. .623 Present value of 1 for 16 periods at 4%.............................................. .534 Present value of annuity for 8 periods at 6%...................................... 6.210 Present value of annuity for 8 periods at 8%...................................... 5.747 Present value of annuity for 16 periods at 3%.................................... 12.561 Present value of annuity for 16 periods at 4%.................................... 11.652 The issue price of the bond is a.$889,560 b.$999,600 c.$883,560 d.$884,820
Chapter6: Bonds (debt) - Characteristics And Valuation
Section: Chapter Questions
Problem 9PROB
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QUESTION 30
- On January 1, 2013, Ellison Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are:
- Present value of 1 for 8 periods at 6%................................................ .627
- Present value of 1 for 8 periods at 8%................................................ .540
- Present value of 1 for 16 periods at 3%.............................................. .623
- Present value of 1 for 16 periods at 4%.............................................. .534
- Present value of annuity for 8 periods at 6%...................................... 6.210
- Present value of annuity for 8 periods at 8%...................................... 5.747
- Present value of annuity for 16 periods at 3%.................................... 12.561
- Present value of annuity for 16 periods at 4%.................................... 11.652
- The issue price of the bond is
- a.$889,560
- b.$999,600
- c.$883,560
- d.$884,820
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