To calculate the cash received from the sale of bonds, we need to consider both the face value of the bonds and the price at which they are issued. In this scenario, we have:
- Face value of bonds: $1,000,000
- Issue price: 102 3/4
The price of 102 3/4 means that the bonds are being sold at 102.75% of their face value. To find out how much cash is received:
- Convert the issue price into decimal form: 102 3/4 = 102.75 / 100 = 1.0275
- Now, multiply the face value by the price factor:
Cash received = Face value × Price factor - Calculation:
Cash received = $1,000,000 × 1.0275 = $1,027,500
Therefore, when 1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale will be $1,027,500.