On January 1, Kuapono, Inc. issued a 25-year semiannual bond with a face value of $525,000 paying 8%. On the date of issue, the market rate for similar bonds was 2%. Kuapono would like to know how much this issuance would raise.

What framework will you use to solve this problem?

• Cost-Volume-Profit (CVP)

• Counting - Permutation or Combination

• Time Value of Money (TVM)

• Binomial Probability - B(n, p)

• Normal or Normal Approximation

Complete the table below. Be sure to enter dollar signs, commas, and percent signs when appropriate.

TVM Data Table

c/y	n	i	PV	PMT	FV
1

[UNGRADED] Based on the relationship between the two given interest rates, do you think this bond will be issued at

• a premium

• par

• a discount

What is the value of the ordinary annuity factor, AO(), that is used to value the cash flows of the interest payments?

What is the value of the discount factor, DF(), that is used to discount the maturity value?

How much does Kuapono raise from this issue? . You may ignore transaction costs.

[On your own] Were you correct about whether the bond was issued at a premium, discount, or at par?