Question

Pearl Corporation issues $380,000 of 9% bonds, due in 10 years, with interest payable semi-annually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.

Answer 1

the issue price of the bonds is $356,321.80.

Step-by-step explanation:

The issue price of the bonds, PV can be determined using a Financial Calculator as follows :

Pmt = ($380,000 × 9%) ÷ 2 = $17,100

n = 10 × 2 = 20

P/yr = 2

YTM = 10%

Fv = $380,000

PV = ?

The issue price of the bonds, PV is $356,321.80