Determining the Proceeds from Bond Issues

Madison Corporation is authorized to issue $$760,000$ of $5-$year bonds dated June $30,2019,$ with a stated rate of interest of $11\%.$ Interest on the bonds is payable semiannually, and the bonds are sold on June $30,2019.$

Required:

Determine the proceeds that the company will receive if it sells the following: $($Click here to access the tables to use with this exercise and round your answers to two decimal places, if necessary.$)$

$1.$ The bonds to yield $12\%$ $fill in the blank $1$

$2.$ The bonds to yield $10\%$ $fill in the blank $2$

Feedback Area

Feedback

You should determine the selling price by using the effective rate to determine the present value of both the future principal and periodic interest payments. When interest is paid semiannually, you should divide the effective rate by the interest periods per year to determine the effective rate per semiannual period $($for example, $12\%-$: $2$ periods $=6\%$ semiannual rate$).$ You should also express the time to maturity in semiannual periods $($for example, $5$ year bonds $\backslash$times $2$ periods $=10$ semiannual periods$).$ You should use the same number of interest periods for both principal and interest calculations.