Leahy Corp. sells $300,000 of bonds to private investors. The bonds are due in five years, have an 6% coupon rate, and interest is paid semiannually. The bonds were sold to yield 4%. What proceeds does Leahy receive from the investors (exclude any issuance costs/fees paid to bankers) (hint: refresh your bond pricing knowledge from managerial finance)? Question 10 options: a) $274,345 b) $300,000 c) $299,999 d) $326,948

$326,948 ,

Explanation:

The computation of the proceeds leahy received from the investors is shown below:

Present value of the bonds = Stated semi-annual interest x PVIFA 4%, 10 years + Maturity amount x PVIF 4%, 10 years

= ($300,000 × 6% ÷ 2) ×  8.98258 + $300,000 x 0.820348

= $326,948

Refer to the PVIFA table and PVIF table

Moreover in the semi annual, the rate of interest is half and the time period is doubles

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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