On January 1, 20X1, A-Ace Corp. issued $3,000,000 par value 12%, 10 year bonds which pay interest each December 31. If the market rate of interest was 14%, what should the issue price of the bonds be? (The present value factor for $1 in 10 periods at 12% is .3220 and at 14% is .2697. The present value of an annuity of $1 factor for 10 periods at 12% is 5.6502 and at 14% is 5.2161.)
A) $2,686,896
B) $2,843,172
C) $3,000,000
D) $3,339,084

Question

Quizplus · Accepted Answer

Calculation: ($360,000 × 5.2161) + ($3,000,000 × .2697) = $2,686,896.