Question

Required information Use the following information for the Quick Study below. (The following information applies to the questions displayed below.] Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 8712. QS 10-3A Computing bond price LO C2 Confirm that the bonds' selling price is approximately correct (within $100). Use present value Table B.1 and Table B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table values in calculations.) = Selling Price ľ Present Value Par Value x Price 87% Cash Flow Table Value $250,000 par (maturity) value $10,000 interest payment Price of Bond Difference due to rounding of table values

Answer 1

Calculate following

Par value	* price	=	Selling price
250000	*87.50	=	218750
Cash flow	Table value		Present value
250000 par maturity value	0.3769		94225
10000 Interest payable	12.4622		124622
Price of bonds			218847
Difference due to rounding of table values			97