Question

Bond Pricing Using Tables

Bond Pricing Using Tables 1. Calculate the price of a bond using tables. D Bond Pricing - Excel 7 - X . . HOME FILE INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign in B T U . A Alignment Number - Cells Editing Paste Clipboard A1 3- Font Conditional Format as Cell Formatting Table Styles Styles X 1 On January 1, Ruiz Company issued bonds as follows: 1 On January 1, Ruiz Company issued bonds as follows: $ ces Face Value: Number of Years: Stated Interest Rate: Interest payments per year 500.000 15 7% 2 9 Required: 10 I) Calculate the bond selling price given the two market interest rates below. 11 Use formulas that reference data from this worksheet and from the appropriate future or 12 present value tables (found by clicking the tabs at the bottom of this worksheet). 13 Note: Rounding is not required 14 a) Annual Market Rate Semiannual Interest Payment: PV of Face Value: + PV of Interest Payments: < Prev 8 of 9 Next >

Answer 1

X fx 1(a) C D E F G 500,000 $ 500,000 face value number of years stated interest rate interest payments per year face value number of years stated interest rate interest payments per year 1 2 7% 2 1(a) 9% annual market rate 9% semiannual interest payment $ 17,500 PV of face value $ 133,500.01 PV of interest payments $285,055.55 bond selling price $ 418,555.56 market interest rate semiannual interest payment $ 17,500 bond selling price: $ 396,809.89 1 (b) 1 (b) market interest rate 5.50% semiannual interest payment $ 17,500 bond selling price: $ 609,584.98 annual market rate semiannual interest payment PV of face value PV of interest payments bond selling price 6% $ 17,500 $ 205,993.38 $ 343,007.72 $ 549,001.10 the bond in (a) is sold at a: the bond in (b) is sold at a: Discount Premium the bond in (a) is sold at a: the bond in (b) is sold at a: Discount Premium 3(a) 9% annual market rate bond selling price $418,555.56 3 (a) 6% annual market rate bond selling price $ 549,001.10

for formulas and calculations, refer to the image below -

1 x fx 1(a) А 500000 500000 face value number of years stated interest rate interest payments per year 0.07 12 face value number of years stated interest rate interest payments per year 0.07 2 1(a) annual market rate 0.09 semiannual interest payment =D2 D4/D5 PV of face value --PV(07/2,D3*2,0,02) PV of interest payments --PV(D7/2,D3*2,D8) bond selling price =D9+D10 1 (a) market interest rate 0.09 semiannual interest payment =H3*H5/H6 bond selling price: --PV(H8/2, H4*2, H9,H3) + 1(b) market interest rate 0.055 semiannual interest payment =H3*H5/H6 bond selling price: --PV(H12/2,H4*2, H13,H3) 1 (b) annual market rate 0.06 semiannual interest payment =D2*D4/D5 I=D2*04/05 PV of face value --PV(D13/2,D3*2,0,D2) PV of interest payments --PV(D13/2,D3*2,D14) bond selling price =D15+D16 the bond in (a) is sold at a: the bond in (b) is sold at a: =IF(H10>H3,"Premium","Discount") =IF(H14>H3,"Premium","Discount") the bond in (a) is sold at a: the bond in (b) is sold at a: =IF(D11>D2,"Premium","Discount") =IF(D17>D2,"Premium","Discount") 3 (a) annual market rate bond selling price 0.09 --PV(D22/2,D3*2,D3,D2) 3 (a) annual market rate bond selling price 0.06 --PV(D25/2,D3*2,D14,D2)