The face value of a bond is $71,000, its stated rate is 7%, and the term of the bond is five years. The bond pays interest semiannually. At the time of issue, the market rate is 8%. Determine the present value of the bonds at issuance.

The face value of a bond is $71,000, its stated rate is 7%, and the term of the bond is five years. The bond pays interest semiannually. At the time of issue, the market rate is 8%. Determine the present value of the bonds at issuance.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 13Q: A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market...

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

The face value of a bond is $71,000, its stated rate is 7%, and the term of the bond is five years. The bond pays
interest semiannually. At the time of issue, the market rate is 8%. Determine the present value of the bonds at
issuance.

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