Question

Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 1/4.

A Confirm that the bonds' selling price is approximately correct (within $100). Use the present value tables B.1 and B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table values in calculations. Round your other final answers to the nearest whole dollar amount.)
Per value x price = Selling price
$240,000 117 1/4 $281,400
Cash flow Table value Present Value
$240,000 par (maturity) value
$12,000 interest payment
price of the bond
Difference due to rounding of table values

Answer 1

Par Value x price = Selling Price

240,000 x 117.25 = 281,400

Cashflow Table value = Present value

240,000 0.3083 (Present Value table 4%, 30 periods) 73,992

12,000 17.292 (PV annuity table 4%, 30 periods) +207,504

281,496

Difference due to rounding 281,400 -281,496 = -96