What was the issuance price of the bonds if the market rate of Interest was 8%?

On January 1, 2016, Jason Company Issued $5 million of 10-year bonds at a 10% coupon Interest rate to be paid annually. The following present value factors have been provided:

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Expert Solution

Answer is A $5,670,000

Face Value = $5,000,000

Annual Coupon Rate = 10%

Annual Coupon = 10%*$5,000,000

Annual Coupon = $500,000

Time to Maturity = 10 years

Market Rate of Interest = 8%

Price = $500,000*PVA(8%, 10) + 5,000,000*PV(8%, 10)

Price = $500,000*6.710 + 5,000,000*0.463

Price = $5,670,000

The issuance price of the bonds if the market rate of Interest was 8% is : $5.670,000

S Mahalaxmi answered 2 years ago

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