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Onomo, Inc. plans to issue a 20-year semiannual bond with a face value of $235,000 paying 3%. On the date of issue, it expects the market rate for similar bonds will be 8%. Under these conditions, Onomo would like to know how much this issuance would raise.

What framework will you use to solve this problem?

• Cost-Volume-Profit (CVP)

• Counting - Permutation or Combination

• Time Value of Money (TVM)

• Binomial Probability - B(n, p)

• Normal or Standard Normal Distribution

Complete the table below. For the amounts (PV, PMT, & FV) please enter the number only with no dollar sign or commas. Do not forget to include percent signs, where appropriate.

TVM Data Table

c/y	n	i	PV	PMT	FV
1

[UNGRADED] Before you perform any computation: Based on the relationship between the two given interest rates, do you think this bond will be issued at

• a premium

• par

• a discount

Which type of annuity should you use for this problem?

• ordinary annuity

• annuity due

What is the value of the annuity factor that is used to value the cash flows of the interest payments?

What is the value of the discount factor, DF(), that is used to discount the maturity value?

How much does Onomo raise from this issue? $ . You may ignore transaction costs. (round to cents ~ two decimal places).

[UNGRADED On your own] Were you correct about whether the bond was issued at a premium, discount, or at par?

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