Everhart Company issues $10,000,000, 6%, 5-year bonds dated January 1, 2010 on January 1, 2010. The...
Everhart Company issues $10,000,000, 6%, 5-year bonds dated January 1, 2010 on January 1, 2010. The bonds pays interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
|
2.5% |
3.0% |
5.0% |
6.0% |
|
|
Present value of a single sum for 5 periods |
.88385 |
.86261 |
.78353 |
.74726 |
|
Present value of a single sum for 10 periods |
.78120 |
.74409 |
.61391 |
.55839 |
|
Present value of an annuity for 5 periods |
4.64583 |
4.57971 |
4.32948 |
4.21236 |
|
Present value of an annuity for 10 periods |
8.75206 |
8.53020 |
7.72173 |
7.36009 |
A. $10,437,618
B. $10,000,000
C. $10,434,616
D. $10,432,988
Homework Answers
| Face Value | 10000000 |
| Coupon rate | 6% |
| Semiannual coupon Rate | 3.00% |
| No of semiannual periods | 10 |
| Annual Yield | 5% |
| Semiannual yield | 2.50% |
| Semiannual Interest | 300000 |
Proceeds from bond issue
= Present Value of Interest + Present Value of Maturity Value
= [Interest * PVAF(2.5%, 10)] + [Maturity Value * PVIF(2.5%,10)]
= [$300000 * 8.75206] + [$10000000 * 0.7812]
= $2625618 + $7812000
= $10,437,618
Correct Option is A) $10,437,618
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