On January 2, 2020, Oriole Company wishes to issue $6300000 (par value) of its 8%, 10-year bonds

Accounting Nov 23, 2020

On January 2, 2020, Oriole Company wishes to issue $6300000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Oriole will realize from the sale (issuance) of the bonds.

Present value of 1 at 8% for 10 periods

0.4632Present value of 1 at 10% for 10 periods

0.3855Present value of an ordinary annuity at 8% for 10 periods

6.7101Present value of an ordinary annuity at 10% for 10 periods

6.1446

$6300000

$5525528

$6300038

$6967964

Expert Solution

Computation of Amount that Oriole will realize from the sale (issuance) of the bonds:

Present Value of Principle Amount = $6,300,000*0.3855 = $2,428,650

Present Value of Interest Amount = ($6,300,000*8%)*6.1446 = $3,096,878.40

Total = $2,428,650 + $3,096,878.40 = $5,525,528.40

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