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Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6%...

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a financial calculator or Excel)

Multiple Choice

  • $100,000.

  • $104,265.

  • $71,906.

  • $95,842.

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Answer #1

Issue price = Present value of interest+Present value of maturity

= (100000*3%*8.31661)+(100000*0.70892)

Issue price = $95842

So answer is d) $95842

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