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Mufala, Inc., will issue $10,000,000 of 6% 10-year bonds. The market rate for bonds with similar risk and maturity is 8%. Interest will be paid by Mufala semiannually. What is the issue price of the bonds
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Mufala, Inc., will issue $10,000,000 of 6% 10-year bonds. The market rate for bonds with similar risk and maturity is 8%. Interest will be paid by Mufala semiannually. What is the issue price of the bonds

User Serge Farny
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1 Answer

3 votes

Answer:

the issue price of the bond is $8,640,999

Step-by-step explanation:

The computation of the issue price of the bond is shown below:

Particulars Amount PV factor Present value

Semi-annual Interest $300,000 13.59033 $4,077,099

Principal $10,000,000 0.45639 $4,563,900

Issue price of the bonds $8,640,999

Therefore the issue price of the bond is $8,640,999

User Nuker
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4.9k points
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