Question

On January 1, 2020, Oregon Company issued eight-year bonds with a face value of $6,000,000 and a stated interest rate of 6%, payable semiannually onJune 30 and December 31. Determine the issue price of the bonds, assuming the bonds were sold to yield 8% (require use of present value tables):

Answer 1

the issue price of the bond is $5,301,360

Step-by-step explanation:

The computation of the issue price of the bond is shown below/;

= (semiannual interest payment × present value annuity (16,4%)) + (face value × present value factor (4%,16))

= (($6,000,000 × 6% ÷ 2) × 11.652) + ($6,000,000 × .534)

= $2,097,360 + $3,204,000

= $5,301,360

Hence, the issue price of the bond is $5,301,360