Stevens Company is about to issue $400,000 of 10-year bonds paying an 8% interest rate with interest payable semiannually. The effective interest rate for such securities is 10%. Below are available time value of money factors that Stevens chooses from to calculate compounded interest.
$\begin{array}{|l|l|l|l|l|}
\hline &10 \text { periods, } & 20 \text { periods, } & 10 \text { periods, } & 20 \text { periods, } \
&8 \% & 4 \% & 10 \% & 5 \%\
\hline \text { Present Value of 1 } & 0.46319 & 0.45639 & 0.38554 & 0.37689 \
\hline \text { Future Value of 1 } & 2.15892 & 2.19112 & 2.59374 & 2.65330 \
\hline \begin{array}{l}
\text { Present Value of an } \
\text { Annuity of 1 }
\end{array} & 6.71008 & 13.59033 & 6.14457 & 12.46221 \
\hline \begin{array}{l}
\text { Future Value of an } \
\text { Annuity of 1 }
\end{array} & 14.48656 & 29.77808 & 15.93743 & 33.06595 \
\hline
\end{array}$
To the closest dollar, how much can Stevens expect to receive for the sale of these bonds?
A)$350,151
B)$292,637
C)$800,000
D)$1,405,503

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of the bonds is $350,151. This is calculated by multiplying the face value of the bonds ($400,000) by the present value of an annuity of 1 for 20 periods at 10% (6.14457).

Stevens Company Is About to Issue $400,000 of 10-Year Bonds