Question

Complete the below table to calculate the price of a $1.6 million bond issue under each of the following independent assumptions (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

1. Maturity 16 years, interest paid annually, stated rate 10%, effective (market) rate 12%.
2. Maturity 15 years, interest paid semiannually, stated rate 10%, effective (market) rate 12%.
3. Maturity 10 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%.
4. Maturity 20 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%.
5. Maturity 20 years, interest paid semiannually, stated rate 12%, effective (market) rate 12%.

	Table values are based on: n = i = Cash Flow Amount Present Value Interest Principal Price of bonds

Answer 1

1. Maturity 16 years, interest paid annually, stated rate 10%, effective (market) rate 12%.
	Table values are based on:
	n =	16
	i =	12%
	Cash Flow	Amount	Present Value
	Interest	$    1,60,000.00	$ 11,15,837.78
	Principal	$ 16,00,000.00	$    2,60,994.66
	Price of bonds		$ 13,76,832.44
2. Maturity 15 years, interest paid semiannually, stated rate 10%, effective (market) rate 12%.
	Table values are based on:
	n =	30
	i =	0.06	or 6%
	Cash Flow	Amount	Present Value
	Interest	$       80,000.00	$ 11,01,186.49
	Principal	$ 16,00,000.00	$    2,78,576.21
	Price of bonds		$ 13,79,762.70
3. Maturity 10 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%.
	Table values are based on:
	n =	20
	i =	0.05	or 5%
	Cash Flow	Amount	Present Value
	Interest	$       96,000.00	$ 11,96,372.19
	Principal	$ 16,00,000.00	$    6,03,023.17
	Price of bonds		$ 17,99,395.37
4. Maturity 20 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%.
	Table values are based on:
	n =	40
	i =	0.05	or 5%
	Cash Flow	Amount	Present Value
	Interest	$       96,000.00	$ 16,47,272.29
	Principal	$ 16,00,000.00	$    2,27,273.09
	Price of bonds		$ 18,74,545.38
5. Maturity 20 years, interest paid semiannually, stated rate 12%, effective (market) rate 12%.
	Table values are based on:
	n =	40
	i =	0.06	or 5%
	Cash Flow	Amount	Present Value
	Interest	$       96,000.00	$ 14,44,444.50
	Principal	$ 16,00,000.00	$    1,55,555.50
	Price of bonds		$ 16,00,000.00
	Let me know the wrong answers. (there may be clerical error which I can correct it.
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