ltem 3Score 0 0 of 1 Assume that Northern Petroleum Inc issu

?ltem 3-Score: 0% (0 of 1) Assume that Northern Petroleum Inc. issued the following bond on January 1: Face amount: $100,000 Contract interest rate: 12% Effective interest rate: 12% Interest is paid semiannually on January 1 and July 1 Term of bond: 5 years Based on this information, what is the present value of the periodic interest to be paid on the bonds? a. $12,000 x b. $60,000 c. $43,257 d. $44,161 Feedback: Incorrect. Present value of 10 semiannual interest payments of $6,000 at 12% miannuall: $6.000 x 7.36009 $44,161

Solution

Calculate present value of periodic interest :

Present value of periodic interesst = 100000*6%*7.36009 = $44161

So answer is d) $44161