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Snap company issues 10% five year bonds on january 1 of this year, with a par value of 120,000 and semiannual interest payments

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Answer:

$189,292.92

Explanation:

Using the compound interest formula to get the equivalent amount after 5 years;

A = P(1+r/n)^nt

P is the principal = 120,000

r is the rate = 10% = 0.1

t is the time = 5 years

n is the time of compounding = 1/2 = 0.5(semi annual interest)

Substitute into the formula;

A = 120,000(1+0.1/0.5)^(5)(0.5)

A = 120,000(1+0.2)^2.5

A = 120,000(1.2)^2.5

A = 120,000(1.5774)

A = 189,292.92

Hence the company issue is $189,292.92

User Jay Souper
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