Question

Complete the below table to calculate the price of a $1.5 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 15 years, interest paid annually, stated rate 8%, effective (market) rate 10%. 2. Maturity 15 years, interest paid semiannually, stated rate 8%, effective (market) rate 10% 3. Maturity 5 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%. 4. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%. 5. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 10%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Maturity 15 years, interest paid annually, stated rate 8%, effective (market) rate 10%. (Round your answers to the nearest whole dollar.) Table values are based on: n=1 Amount Present Value Cash Flow Interest Principal Price of bonds Required 1 Required 2 >

Answer 1

				Present value factor used
Table values are based on:				PVAF(i,n)	PVIF(i,n)
n=	15		1	8.55948	0.23939
i=	8.0%		2	15.37245	0.23138
Cash Flow	Amount	Present Value	3	8.1109	0.67556
Interest	$1,500,000*8% =$120,000	$10,27,138	4	13.59033	0.45639
Principal	$1,500,000	$3,59,085	5	12.46221	0.37689
Price of Bonds		$13,86,223
Table values are based on:
n=	30
i=	4.0%
Cash Flow	Amount	Present Value
Interest	$1,500,000*4% =$60,000	$9,22,347
Principal	$1,500,000	$3,47,070
Price of Bonds		$12,69,417
Table values are based on:
n=	10
i=	5.0%
Cash Flow	Amount	Present Value
Interest	$1,500,000*5% =$75,000	$6,08,318
Principal	$1,500,000	$10,13,340
Price of Bonds		$16,21,658
Table values are based on:
n=	20
i=	5.0%
Cash Flow	Amount	Present Value
Interest	$1,500,000*5% =$75,000	$10,19,275
Principal	$1,500,000	$6,84,585
Price of Bonds		$17,03,860
Table values are based on:
n=	20
i=	5.0%
Cash Flow	Amount	Present Value
Interest	$1,500,000*5% =$75,000	$9,34,666
Principal	$1,500,000	$5,65,335
Price of Bonds		$15,00,001