On January 1, 2018 Fox Co. issued $400,000, 12%, 2-year bonds that pay interest

Question

On January 1, 2018 Fox Co. issued $400,000, 12%, 2-year bonds that pay interest semi-annually, July 1 and January 1. When issued, investors required 6% interest and the bonds are due January 1, 2020. What is the issue price of these bonds? Use the appropriate present value factors below to answer this Question: Present Value Factors2%3%4%6%12% Single sum-2 periods.96117 .94260 .92456 .89000 .79719 Single sum-4 periods.92385 .88849 .85480 .79209 .63552 Ordinary annuity-2 periods1.94156 1.91347 1.88609 1.83339 1.69005 Ordinary annuity-4 periods3.80773 3.71710 3.62990 3.46511 3.03735 Annuity due-2 periods1.98039 1.97087 1.96154 1.94340 1.89286 Annuity due-4 periods3.88388 3.82861 3.77509 3.67301 3.40183 $444,606 $358,417 $533,817 $437,524 On January 1, 2018 Fox Co. issued $400,000, 12%, 2-year bonds that pay interest semi-annually, July 1 and January 1. When issued, investors required 6% interest and the bonds are due January 1, 2020. What is the issue price of these bonds? Use the appropriate present value factors below to answer this Question: Present Value Factors2%3%4%6%12% Single sum-2 periods.96117 .94260 .92456 .89000 .79719 Single sum-4 periods.92385 .88849 .85480 .79209 .63552 Ordinary annuity-2 periods1.94156 1.91347 1.88609 1.83339 1.69005 Ordinary annuity-4 periods3.80773 3.71710 3.62990 3.46511 3.03735 Annuity due-2 periods1.98039 1.97087 1.96154 1.94340 1.89286 Annuity due-4 periods3.88388 3.82861 3.77509 3.67301 3.40183 $444,606 $358,417 $533,817 $437,524 On January 1, 2018 Fox Co. issued $400,000, 12%, 2-year bonds that pay interest semi-annually, July 1 and January 1. When issued, investors required 6% interest and the bonds are due January 1, 2020. What is the issue price of these bonds? Use the appropriate present value factors below to answer this Question: Present Value Factors2%3%4%6%12% Single sum-2 periods.96117 .94260 .92456 .89000 .79719 Single sum-4 periods.92385 .88849 .85480 .79209 .63552 Ordinary annuity-2 periods1.94156 1.91347 1.88609 1.83339 1.69005 Ordinary annuity-4 periods3.80773 3.71710 3.62990 3.46511 3.03735 Annuity due-2 periods1.98039 1.97087 1.96154 1.94340 1.89286 Annuity due-4 periods3.88388 3.82861 3.77509 3.67301 3.40183 $444,606 $358,417 $533,817 $437,524

Explanation / Answer

Issue price of bonds = (present value of interest)+(present value of maturity payment)

= (400000*6%*3.71710)+(400000*0.88849)

Issue price of bonds = 444606

so answer is a) 444,606

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