Question 4

On January 2, 2017, Crane Company wishes to issue $6400000 (par value) of its 6%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 11%. Using the interest factors below, compute the amount that Crane will realize from the sale (issuance) of the bonds.

Present value of 1 at 6% for 10 periods

0.5584Present value of 1 at 11% for 10 periods

0.3522Present value of an ordinary annuity at 6% for 10 periods

7.3601Present value of an ordinary annuity at 11% for 10 periods

5.8892

$7040000

$7040042

$4515533

$7078566