Question

CALCULATOR FULL S Exercise 6-7 What would you pay for a $225,000 debenture bond that matures in 15 years and pays $11,250 a year in interest if you wanted to earn a yield of Click here to view factor tables 2%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to decimal places, eg. 458.581.) Amount to Pay 3%7 (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to decimal places, e.g. 458,581.) Amount to Pay 4% (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to o decimal places, s. 458.581.) Amount to Pay Click if you would like to show Work for this questioni Open Show Work

Answer 1

Answer 1	At 2%
	Amount to Pay	$          311,731
Answer 2	At 3%
	Amount to Pay	$          278,720
Answer 3	At 4%
	Amount to Pay	$          250,015

Calculated as

Value of Bond if yield is 2%
	Year	Amount	PV @ 2%	Present Value
1 to 15 Annual int payments	1-15	$    11,250	12.84926	$          144,554
Maturity Value at end of 15th period	15	$ 225,000	0.74301	$          167,177
Value of bond				$          311,731
Value of Bond if yield is 3%
	Year	Amount	PV @ 3%	Present Value
1 to 15 Annual int payments	1-15	$    11,250	11.93794	$          134,302
Maturity Value at end of 15th period	15	$ 225,000	0.64186	$          144,419
Value of bond				$          278,720
Value of Bond if yield is 4%
	Year	Amount	PV @ 4%	Present Value
1 to 15 Annual int payments	1-15	$    11,250	11.11839	$          125,082
Maturity Value at end of 15th period	15	$ 225,000	0.55526	$          124,934
Value of bond				$          250,015

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