A corporation issues for cash $9,000,000 of 8%, 25-year bonds, interest payable
ID: 2450935 • Letter: A
Question
A corporation issues for cash $9,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be the
present value of 50 semiannual interest payments of $360,000, plus present value of $9,000,000 to be repaid in 25 years.
present value of 25 annual interest payments of $720,000.
present value of 25 annual interest payments of $720,000 plus present value of $9,000,000 in 25 years.
present value of $9,000,000 to be repaid in 25 years, less present value of 50 semiannual interest paymentss of $360,000.
none of the above
a.present value of 50 semiannual interest payments of $360,000, plus present value of $9,000,000 to be repaid in 25 years.
b.present value of 25 annual interest payments of $720,000.
c.present value of 25 annual interest payments of $720,000 plus present value of $9,000,000 in 25 years.
d.present value of $9,000,000 to be repaid in 25 years, less present value of 50 semiannual interest paymentss of $360,000.
e.none of the above
Explanation / Answer
present value of bond = (PVAF@x%,50 * semiannual interest ) +(PVF@x%,50 *par value)
so correct option is none of above- Present value of 50 semiannual interest of $ 360000 plus present value of $ 9,000,000 to be repaid at year 25 (50 semiannual month)
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