Question

Complete the below table to calculate the price of a $1.8 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 10%, effective (market) rate 12%.
2. Maturity 15 years, interest paid semiannually, stated rate 10%, effective (market) rate 12%.
3. Maturity 8 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%.

4. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%.
5. Maturity 15 years, interest paid semiannually, stated rate 12%, effective (market) rate 12%.
4. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%.
5. Maturity 15 years, interest paid semiannually, stated rate 12%, effective (market) rate 12%.

	Table values are based on: n = not attempted i = not attempted Cash Flow Amount Present Value Interest not attempted not attempted Principal not attempted not attempted Price of bonds

Answer 1

Part 1
Table values are based on:
n=	15
i=	12.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	6.81086	$1,80,000	$12,25,955
PV of Principal	0.1827	$18,00,000	$3,28,860
PV of Bonds Payable			$15,54,815
Part 2
Table values are based on:
n=	30
i=	6.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	13.76483	$90,000	$12,38,835
PV of Principal	0.17411	$18,00,000	$3,13,398
PV of Bonds Payable			$15,52,233
Part 3
Table values are based on:
n=	16
i=	5.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	10.83777	$1,08,000	$11,70,479
PV of Principal	0.45811	$18,00,000	$8,24,598
PV of Bonds Payable			$19,95,077
Part 4
Table values are based on:
n=	20
i=	4.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	13.59033	$90,000	$12,23,130
PV of Principal	0.45639	$18,00,000	$8,21,502
PV of Bonds Payable			$20,44,632
Part 5
Table values are based on:
n=	30
i=	6.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	13.76483	$1,08,000	$14,86,602
PV of Principal	0.17411	$18,00,000	$3,13,398
PV of Bonds Payable			$18,00,000