Issue Price

Parker Limited plans to issue $250,000 face value bonds with a stated interest rate of 8%. They will mature in 6 years. Interest will be paid semiannually. At the date of issuance, assume the market rate is (a) 8%, (b) 6%, and (c) 10%.

Use the appropriate present value table:

PV of $1

6 periods 8%, 0.63017

6 periods 6%, 0.70496

6 periods 10%, 0.56447

PV of Annuity of $1

6 periods 3%, 5.41719

6 periods 5%, 5.07569

6 periods 6%, 4.91732

6 periods 8%, 4.62288

6 periods 10%, 4.35526

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.

At what price will the bond be issued in market rate 8% , 6%, 10% ?

Market Rate

price of 8%

price of 6%

price of 10%