In: Accounting
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:
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