Question

P6-16 Bond valuation: Annual interest Calculate the value of each of the bonds shown the following table, all of which pay interest annually. Bond Years to maturity Par value Required return Coupon interest rate $1,000 12% 14% 20 1,000 8 8 16 100 10 8 13 D 500 16 13 18 1,000 12 10 10 ABCA E

Answer 1

- value of the bond! > Pas value $LODO coupon rate - 142 Maturity = 20 years Petermination of Spterest :- $ 1000x10% = $140 * Present ralue of Interect paymente at required rate 18%. for 20 years Present value Interest faclos for Annuity @ 12% for 20 yrs - 6:1943 Present value of Interest payments is = $140 86-1943 =$867.20 Present value of Bonds face value is Parvalue x Present value Anterest factura . @ 12% for course + + doterest present value. . Present Value 1000 x 1037 103.7 - Bond present value = $867.2 + $103.7 = $940.9

L Ⓡ Value - (42 B/. 164 Bond present value + Anterest presentralien 1000 (PVIF, 87,16 years) + lodd x87. (PXIDP 1000 x 122919 + 80 (8.8614) 2291.9 7 708.11 & 100 0:01 © valueol Bond .'- G Byears) = 100x (PVIF, 137., 8years) + 100x10% (PXIAF @ 13% 5 100% -54027 + 10% 5.7466 € 54.0227 +57.466 → 111.49 (D) value of Bond D:- => 500x (pvir @ 18% 13 yeass) +500x167. (PVIAF @ 18% 1347-8) 500%.1163 + 80x 4.9095 58.15 + 392.76 => 450.91

value of Bond t' => 1000 * (PVIP @ 10% 10year) + 1000x12%. (PvInf@ 10/. Voyy) 1000X -8865 + 100 x 6.144 to 3876.5 + 439-34 个 1128-841 where = PV IP PULAR Present Value » Present value Doterent facto Interest Annuity facts.