Question

Sunland Company is about to issue $262,700 of 6-year bonds paying an 9% interest rate, with interest payable semiannually. The discount rate for such securities is 8%.

Required:
In this case, how much can Sunland expect to receive from the sale of these bonds?

Answer 1

Amount from sale of bonds $275,028

Step-by-step explanation:

The computation is shown below;

Particulars Amount PV factor Present value of cash flows

Interest $11,821.50 9.38507 $1,10,946

($262,700 × 0.09 × 6 ÷ 12)

Principal $262,700 0.6246 $164,082

Amount from sale of bonds $275,028