Question: On 1 July 2018 Michaela Ltd issues $4,000,000 in five-year debentures that pay interest each six months at a coupon rate of 10 per cent.

On 1 July 2018 Michaela Ltd issues $4,000,000 in five-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 8 per cent. Interest expense is determined using the effective-interest method.

Required

Determine the issue price.

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