On January 1, 2012, Hutton Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually onJune 30 and December 31.

On January 1, 2012, Hutton Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually onJune 30 and December 31.

Use the following information for questions 7 through 9:

On January 1, 2012, Hutton Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually onJune 30 and December 31. The bonds were sold to yield 8%. Table values are:

Present value of 1 for 8 periods at 6% .627

Present value of 1 for 8 periods at 8% .540

Present value of 1 for 16 periods at 3% .623

Present value of 1 for 16 periods at 4% .534

Present value of annuity for 8 periods at 6% 6.210

Present value of annuity for 8 periods at 8% 5.747

Present value of annuity for 16 periods at 3% 12.561

Present value of annuity for 16 periods at 4% 11.652

7. The present value of the principal is

a. $534,000.

b. $540,000.

c. $623,000.

d. $627,000.

8. The present value of the interest is

a. $344,820.

b. $349,560.

c. $372,600.

d. $376,830.

9. The issue price of the bonds is

a. $883,560.

b. $884,820.

c. $889,560.

d. $999,600.

10. The term used for bonds that are unsecured as to principal is

a. junk bonds.

b. debenture bonds.

c. indebenture bonds.

d. callable bonds.


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