Question

Brooks Corporation issued $800,000 of 15-year bonds on January 1. The bonds pay interest on January 1 and July 1 with a stated annual rate of 8 percent. If the market rate of annual interest at the time the bonds are sold is 6 percent, what will be the issue price of the bonds?

If PV tables are used, select the closest answer from the options provided.)

a. $1,738,786
b. $ 809,145
c. $956,804
d. $921,878

Answer 1

c. $956,804

Step-by-step explanation:

The computation of the issue price of the bond is as follows

Given that

Future value = $800,000

RATE = 6% ÷ 2 = 3%

PMT = $800,000 × 8% ÷ 2 = $32,000

NPER = 15 × 2 = 30

The formula is shown below

=-PV(RATE;NPER;PMT;FV;TYPE)

After applying the above formula, the present value is $956,804

hence, the issued price of the bond is $956,804

Therefore the correct option is c.