Issue Price

Matthison Harcourt plans to issue $800,000 face value bonds with a stated interest rate of 10%. They will mature in 6 years. Interest will be paid semiannually. At the date of issuance, assume the market rate is (a) 10%, (b) 8%, and (c) 12%.

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

Required: For each market interest rate, answer the following questions. Round calculations and answers to the nearest whole dollar. Due to differences in rounding when using the present value factors, you need to round your answer for the ISSUE PRICE in the first column only to the nearest 100.

Market Rate 10% 8% 12% 1. What is the amount due at maturity? $ $ 2. How much cash interest will be paid every six months? $ $ 3. At what price will the bond be issued? $