Charles, Inc., has a $700,000, 8 percent bond issue that was issued a number of years ago at face value. There are now ten years left on the bond issue, and the market interest rate is 16 percent. Interest is paid semiannually. The company purchases the bonds on the open market at the calculated current market value and retires the bonds.

1. Using present value tables, calculate the current market value of the bond issue.

2. Is there a gain or loss on retirement of bonds, and if so, how much is it?

Bond Issue on and Between Interest Dates