Seaside issues a bond with a stated interest rate of 10%,face value of $50,000,and due in 5 years.Interest payments are made semi-annually.The market rate for this type of bond is 12%.What is the issue price of the bond?
A)$83,920.
B)$46,320.
C)$53,605.

Question

Quizplus · Accepted Answer

The bond's issue price is calculated by discounting the semi-annual interest payments and the face value at the market rate of 12% (6% per period). The present value of these cash flows results in an issue price of $46,320.

Seaside Issues a Bond with a Stated Interest Rate of 10%,face