Homework Answers
a: Using financial calculator
Input: FV= 1000, N=7*2=14
I/Y=4, PMT=9.17%*1000/2= 45.85
Solve for PV as -1061.79
Price of the bond = $1061.79
B: This is a premium bond since the price of the bond is greater than its par value.
C: number of bonds to issue= amount required to be raised/price of each bond
= 875000/1061.79
= 824.08
Rounded off to 824 bonds
D: : Using financial calculator
Input: FV= 1000, N=7*2=14
I/Y=4, PMT=0
Solve for PV as –577.48
Price of the bond = $577.48
E: number of bonds to issue= amount required to be raised/price of each bond
= 875000/577.48
= 1515.204
Rounded off to 1515 bonds
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