Company A issues twenty-year bond with a face value of $300,000 on January 1, Year One. According to the bond contract, cash interest at a stated rate of 2 percent will be paid each year beginning December 31, Year One. Company B wants to buy this bond immediately at an annual interest rate of 8 percent. The present value of $1 in twenty years at a rate of 8 percent is 0.215. The present value of an ordinary annuity of $1 per year for twenty years at a rate of 8 percent per year is 9.818. 

How much does Idea Investment Company pay the Vertise Company for this bond (rounded)?

Answer rating: 100% (QA)

To calculate the present value of the bond we need to find the present value of the cash interest pa... View the full answer