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Trew Company plans to issue bonds with a face value of $909,000 and a coupon rate of 6 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to nearest whole dollar.)
Determine the issuance price of the bonds assuming an annual market rate of interest of 8.5 percent.
Issuance price

Answer :

jepessoa

Answer:

$757,943

Explanation:

face value = $909,000

maturity = 10 years x 2 = 20 periods

coupon rate = 6% / 2 = 3%

coupon = $27,270

YTM = 8.5% / 2 = 4.25%

using a financial calculator, the PV of the bonds = $757,943

Dr Cash 757,943

Dr Discount on bonds payable 151,057

    Cr Bonds payable 909,000

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