No. of Period n = 10 years semiannually = 10 x 2 = 20
periods
Rate ( i) = 5% / 2 = 2.5% paid semiannually
Coupon rate = 4%
Note
1
Interest (semiannually) = $78 million x (4%/2) =
$78,000,000 x 2% = $1,560,000 ;
Present Value of Interest = $1,560,000 x PVA (2.5%,20) =
$1,560,000 x 15.58916 = $24,319,090
Note
2
Present Value of Principal = $78 million x PV
(2.5%,20) = $78,000,000 x 0.61027 =
$47,601,060
Price of
Bond = $24,319,090 + $47,601,060 =
$71,920,150
Table Value are Based On : | ||
(No. of Period) n = | 20 periods ( 10 years semiannually = 10 X 2 ) |
|
(Rate) i = | 2.5% ( 5% / 2 = 2.5% paid semiannually) |
|
Cash Flow | Amount | Present Value |
Interest (Note 1) | $1,560,000 | $24,319,090 |
Principal (Note 2) | $78,000,000 | $47,601,060 |
Price of Bonds | $71,920,150 |
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