Heller Company issues 950000 of 10 bonds that pay interest s

Heller Company issues $950,000 of 10% bonds that pay interest semiannually and mature in 10 years.

What is the bonds’ issue price assuming that the bonds’ market interest rate is 14% per year?

Select one:

A. $ 748,714

B. $ 950,000

C. $ 751,788

D. $1,273,515

E. None of the above

Select one:

a. None of the above

b. $748,714

c. $751,788

d. $1,273,515

e. $950,000

Solution

Issue price of bonds = Present value of interest+Present value of maturity

= (950000*5%*10.59401)+(950000*0.25842)

Issue price of bonds = $748714

So answer is a) $748714