Final answer:
Calculating the proceeds from a bond issue involves discounting the expected future interest payments and the principal amount back to their present value at the yield to maturity. Since the exact calculation table isn't provided, the specific answer cannot be given. The exercise demonstrates an understanding of present discounted value in bond pricing. So, the correct answer is A.
Step-by-step explanation:
The question involves calculating the proceeds from a bond issue when the bond is issued at a yield different from its coupon rate. To find the proceeds, we must calculate the present value of both the semiannual interest payments and the principal amount that will be paid at maturity, based on the bonds' yield to maturity (market interest rate).
In the example given, Downing Company issues bonds with a face value of $3,000,000, coupon rate of 6%, and a yield of 5%. The interest is paid semiannually, which means the interest payment is $90,000 every six months (calculated as $3,000,000 x 6% / 2). These payments need to be discounted back to their present value at the market interest rate of 5%. Similarly, the principal amount paid at the end of the term (5 years) is also discounted back to present value at the market interest rate.
Using the present value formula and summing the present value of interest payments and the principal results in the bond's issue price. However, without the actual calculation table (Table C2), the specific answer option cannot be verified with certainty. This is based on understanding the present discounted value and calculation of bond proceeds.