Homework Answers
| Bond characterstics | Amount | ||||||
| 1-a) | Principal | 100,000 | |||||
| interest | 2,000 | ||||||
| Market interest rate | 3% | ||||||
| periods to maturity | 20 | ||||||
| issue price | 85,123 | answer | |||||
| Calculation of bond issue price | |||||||
| Where | |||||||
| i= | 3.00% | ||||||
| t= | 20 | ||||||
| principal | * | PV of $1 at 3% for 20 yrs = | |||||
| 100,000 | * | 0.55368 | = | 55368 | |||
| interest | * | PV of ordinary annuity at 3%= | |||||
| 2000 | * | 14.87747 | = | 29755 | |||
| bond issue price | 85123 | ||||||
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