On January 1, 2017, Vaughn Manufacturing issued eight-year bonds with a face val

Question

On January 1, 2017, Vaughn Manufacturing issued eight-year bonds with a face value of $6130000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:

The issue price of the bonds is

Present value of 1 for 8 periods at 10%          0.467 Present value of 1 for 8 periods at 12%          0.404 Present value of 1 for 16 periods at 5%        0.458 Present value of 1 for 16 periods at 6%        0.394 Present value of annuity for 8 periods at 10%            5.335 Present value of annuity for 8 periods at 12%            4.968 Present value of annuity for 16 periods at 5%          10.838 Present value of annuity for 16 periods at 6%          10.106

Explanation / Answer

Amount PV factor Present value Semi-annual interest 306500 10.106 3097489 Principal 6130000 0.394 2415220 Total 5512709 Option 4 is correct

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