Question
VIC Enterprises issues $500,000 of bonds paying a stated interest rate of 8%. The bonds are due in 10 years, with interest payable annuallyeach year
VIC Enterprises issues $500,000 of bonds paying a stated interest rate of 8%. The bonds are due in 10 years, with interest payable annuallyeach year on Jan. 1st. When the bonds are issued, other bonds of similar risk and maturity are paying 11% (i.e. the discount rate or market interest rate is 11%).
Calculate the issuance (selling) price of this bond:
Present value of interest payments (annuity portion) | _______ (int. payment) * _______(factor)_ = |
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Present Value of Bond Principal (single sum value) | 500,000 (principal) * ________(factor)_= |
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Total Present Value, or selling price |
|
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Is the bond issued at a premium, discount, or face value (par)?
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