Homework SourseBushman Inc issues 400000 of 9 bonds that pay interest semia
Bushman, Inc., issues $400,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the bonds\' market rate is:
a. 6% per year compounded semiannually.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)
b. 8% per year compounded semiannually.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)
| Present value of principal repayment | $Answer |
| Present value of interest payments | $Answer |
| Selling price of bonds | $Answer |
Solution
a. 6% per year compounded semiannually.
b. 8% per year compounded semiannually.
| Present value of principal repayment (0.55368*400000) | 221472 |
| Present value of interest payments (14.87747*18000) | 267794 |
| Selling price of bonds | 489266 |
