Question

When the market rate of interest was 12%, Halprin Corporation issued $257,000, 11%, 10-year bonds that pay interest annually. Use the present value tables below. The selling price of this bond issue was?

Answer 1

The selling price of the bond issue is $197,931.72.

Step-by-step explanation:

The selling price of the bond issue can be calculated using the present value formula. The formula is PV = PMT x (1 - (1 + r)^-n) / r + FV / (1 + r)^n, where PV is the present value, PMT is the annual payment, r is the market interest rate, n is the number of periods, and FV is the face value of the bond.

In this case, the annual payment (PMT) is $28,270 (257,000 x 11%), the market interest rate (r) is 12%, and the number of periods (n) is 10. The face value (FV) would be $257,000.

Plugging in these values into the formula, we can calculate the present value (PV) which would be the selling price of the bond issue. The selling price of the bond issue is $197,931.72.