Homework Answers
Face Value of Bonds = $400,000
Annual Coupon Rate = 9.00%
Semiannual Coupon Rate = 4.50%
Semiannual Coupon = 4.50% * $400,000
Semiannual Coupon = $18,000
Time to Maturity = 8 years
Semiannual Period = 16
Annual Interest Rate = 8.00%
Semiannual Interest Rate = 4.00%
Using factor tables:
Issue Price of Bonds = $18,000 * PVA of $1 (4.00%, 16) +
$400,000 * PV of $1 (4.00%, 16)
Issue Price of Bonds = $18,000 * 11.652 + $400,000 * 0.534
Issue Price of Bonds = $423,336
Using financial calculator:
N = 16
I = 4.00%
PMT = 18000
FV = 400000
PV = -423305
Using Excel function:
“=PV(4.00%, 16, 18000, 400000)” is -423305
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