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21 July, 14:45

Sand Explorers issues bonds due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. Using present value tables, calculate the issue price of the bonds.

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  1. 21 July, 15:13
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    The issue price of the bonds is $186412.10.

    Explanation:

    Price of bond = coupon*PVIFA (n, i) + FV * PVIF (n, i)

    = 7000*PVIFA (20, 4%) + 200000*PVIF (20, 4%)

    = 7000*13.5903 + 200000*0.4564

    = $186412.10

    Therefore, the issue price of the bonds is $186412.10.
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