On January 1,2010,Broker 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 was the issue price of the bonds? (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)$3,339,084
B)$2,843,172
C)$3,000,000
D)$2,686,896

Question

Quizplus · Accepted Answer

Bond issue price ($2,686,896) = Present value of the bond maturity value ($3,000,000 F1F1F1S1F1F1F10 .2697) + Present value of the bonds interest payments ($3,000,000 F1F1F1S1F1F1F10 .12) F1F1F1S1F1F1F10 5.2161