Question
Ernie Banks, Inc. issues $50,000,000 in 8-year bonds on January 1, 2020 at 6%. The bonds pay interest semiannually and are sold at a price
Ernie Banks, Inc. issues $50,000,000 in 8-year bonds on January 1, 2020 at 6%. The bonds pay interest semiannually and are sold at a price to yield 8 percent. How much does Ernie Banks receive when it issues the bonds on Janauary 1, 2020? Note: if you use the PV function in Excel or a financial calculator, you might obtain somewhat different values than those obtained using the table below. You should, however, still be able to identify the best answer. 3% 4% 6% 8% Present value of a single sum for 8 periods 0.78941 0.73069 0.62741 0.54027 Pesent value of a single sum for 16 periods 0.62317 0.53391 0.39365 0.29189 Present value of an ordinary annuity for 8 periods 7.01969 6.73274 6.20979 5.74664 Present value of an ordinary annuity for 16 preiods 12.56110 11.65230 10.10590 8.85137
a.$45,642,870
b.$44,173,950
c.$50,000,000
d.$44,253,420
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