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Wally, Inc. issues $100,000 of 5% bonds, due in 10 years, when the market rate of interest is 6%. Interest is paid semiannually on June 30 and December 31. The issue price of the bonds is:_________

a. $88,530
b. $92,561
c. $92,640
d. $107,795

Respuesta :

Tundexi

Answer:

b. $92,561

Explanation:

Face Value  = 100,000.00

Term (in years)  = 10

Total no. of interest payments  = 20

Market Rate  = 6.0%  / 2 = 3.0%

Coupon Rate  = 5.0%/2 = 2.5%

                                      Amount         PV factor          Present Values

PV of Face Value of      $100,000   0.553675754       $55,367.58

PV of Interest payment $2,500      14.87747486           $37,193.69

Issue Price of Bonds                                                        $92,561.26

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