Answer:
$463,202.25
Explanation:
The computation of the selling price of the bond is shown below:
= Present value of interest + Present value of maturity
where,
In semi-annually, the rate of interest is divided by 2 and the time period is double
The Present value of interest equals to
= $500,000 × 5% × 7.36009
= $184,002.25
The 7.36009 is a PVIFA. Refer to the PVIFA table
And, the Present value of maturity equals to
= $500,000 × 0.5584
= $279,200
The Present value factor is computed below:
= 1÷( 1 + rate)^time
=1÷(1 + 0.06)^10
Now put these values to the above formula
So, the value would equal to
= $184,002.25 + $279,200
= $463,202.25
