CALCULATION OF PRESENT VALUE OF THE BOND IF THE INTEREST PAID HLF ANNUALLY | |||||
Step 1 : Calculation of Semi Annual Coupon Payments | |||||
Par value of the bond issued is = | $2,50,00,000 | ||||
Annual Coupon % | 7.00% | ||||
Annual Coupon Amount | $17,50,000 | ||||
Half Year Coupon Amount = | $8,75,000 | ||||
Step 2: Calculate number of years to Maturity | |||||
Number of years to maturity = 5 years | |||||
No. of Half Year Period = 5 Years X 2 Period = | 10 Periods | ||||
Step 3 : Caclulation of Current Market Price (intrinsic value) of the bonds | |||||
Market rate of interest or Yield to Maturity or Required Return = 9% | |||||
Half yearly Discount rate = 9 % / 2 = | 4.50% | ||||
PVF = 1 / Discount rate = 1/ 1.045 | |||||
Result of above will again divide by 1.045 , repeat this lat period | |||||
Period | Interest | Amount (In Million) | PVF of $ 1 @ 4.5% | PresentValue | |
1 | Interest | $8,75,000 | 0.9569 | $8,37,321 | |
2 | Interest | $8,75,000 | 0.9157 | $8,01,264 | |
3 | Interest | $8,75,000 | 0.8763 | $7,66,760 | |
4 | Interest | $8,75,000 | 0.8386 | $7,33,741 | |
5 | Interest | $8,75,000 | 0.8025 | $7,02,145 | |
6 | Interest | $8,75,000 | 0.7679 | $6,71,909 | |
7 | Interest | $8,75,000 | 0.7348 | $6,42,975 | |
8 | Interest | $8,75,000 | 0.7032 | $6,15,287 | |
9 | Interest | $8,75,000 | 0.6729 | $5,88,791 | |
10 | Interest | $8,75,000 | 0.6439 | $5,63,437 | |
10 | Bond Principal Value | $2,50,00,000 | 0.6439 | $1,60,98,192 | |
Total | $2,30,21,820 | ||||
Present Value of the Bonds Payable = | $2,30,21,820 | ||||
Answer = PV of the Bonds Payable = $ 23,021,820 | |||||
eBook Calculator Print Item Present Value of Bonds Payable; Discount Pinder Co. produces and sells high-quality...
Present Value of Bonds Payable; Discount Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder Co. issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market (effective) interest rate of 9%. Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10. Round to the nearest dollar. $
Present Value of Bonds Payable; Discount Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder Co. issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market (effective) interest rate of 9%. Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10. Round to the nearest dollar. $
Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market (effective) interest rate of 9%. Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar.
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