Question
If I issue a bond that has a face value of $1,000, a stated interest rate of 8%, a maturity of 10 years, and with
If I issue a bond that has a face value of $1,000, a stated interest rate of 8%, a maturity of 10 years, and with semiannual interest payments at an annual market interest rate of 10%, the bond issue price will be:
Select one:
a. $1,000 x 0.38554 (Present Value of $1 @ 10% for 10 periods) + $1,000 x 4% x 12.46221 (Present Value of Annuity of $1 @ 5% for 20 periods) = $884.03
b. $1,000 x 0.37689 (Present Value of $1 @ 5% for 20 periods) + $1,000 x 4% x 6.14457 (Present Value of Annuity of $1 @ 10% for 10 periods) = $622.67
c. $1,000 x 0.38554 (Present Value of $1 @ 10% for 10 periods) + $1,000 x 4% x 6.14457 (Present Value of Annuity of $1 @ 10% for 10 periods) = $631.32
d. $1,000 x 0.37689 (Present Value of $1 @ 5% for 20 periods) + $1,000 x 4% x 12.46221 (Present Value of Annuity of $1 @ 5% for 20 periods) = $882.58
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