Question

Please help

Fill in the missing items for each of the cases below: (Use a financial calculator or a spreadsheet application when necessary to make the appropriate calculations. Round all intermediary and final percentage calculations to the nearest hundredth percent, (X.XX%) or four decimal places XXXX. Round all dollar values to the nearest dollar. Enter applicable discount amounts with a parentheses or a minus sign.) 9: (Click the icon to view the cases.) (1) Data Table Face value $ 120,000 Stated rate 16% (1) (2) Quarterly 4,800 (3) 210,000 $ (4) 1,970,000 Face value $ (d) $ 120,000 16% 10 years Stated rate 4% 4% 0 Interest payment period Interest payment Maturity (in years) Market rate Bond issue price (Discount)premium 12% Quarterly (a) $ Semiamually Semiannually 10,000 $ Quarterly 2,100 $ Quarterly 39,400 Interest payment period Interest payment Maturity (in years) Market rate 10 years 5 years 3 years 5 years 12% 12% (e) 12% Bond issue price (b) (0) (g) ) (Discount)/premium (c) $ (52,640) (h) (k) Print Done

Answer 1

(a)   Interest payment (quarterly) = face value * coupon rate*3/12
= $120,000*16%*3/12
= $4,800
(b)   Bond issue price = present value of interest payments over the life of the bond + present value of redemption price at the maturity
Present value of interest payments = interest payments*present value of $1 annuity @3% for 40 periods
= $4,800*23.115
= $110,952
Present value of redemption price on maturity = redemption price*present value of $1@3% for 40 period
= $120,000*0.3066
= $36,792
Bond issue price = $110,952 + $36,792
= $147,744
(c) Premium = bond issue price – face value
= $147,744 - $120,000
= $27,744
(d)   Interest payment = face value *coupon rate*6/12
$10,000 = face value*4%*6/12
$10,000 = face value*0.02
Face value = $10,000/0.02
= $500,000
(e) Market rate or yield to maturity = {interest expense + (1/10* redemption price – issue price)}/ (1/2* redemption price + issue price)
= {10,000 + (1/10 *500,000 – 447,360)}/(1/2*500,000 + 447,360)
= $15,264/473,680
= 3.22%
(f) Bond issue price = face value ± discount / premium
= $500,000 - $52,640
= $447,360
(g) Bond issue price = present value of interest payments over the life of the bond + present value of redemption price at the maturity
Present value of interest payments = interest payments*present value of $1 annuity @3% for 12 periods
= $2,100*9.95
= $20,895
Present value of redemption price on maturity = redemption price*present value of $1@3% for 12 period
= $210,000*0.7014
= $147,294
Bond issue price = $20,895 + $147,294
= $168,189
(h) Discount = face value – issue price
= $210,000 - $168,189
= $41,811

(i)   Interest payments = face value*stated rate*3/12
$39,400 = $1,970,000*stated rate*3/12
$39,400 = $492,500*stated rate
Stated rate = $39,400/$492,500
Stated rate = 8%

(j) Bond issue price = present value of interest payments over the life of the bond + present value of redemption price at the maturity
Present value of interest payments = interest payments*present value of $1 annuity @3% for 20 periods
= $39,400*14.88
= $586,272
Present value of redemption price on maturity = redemption price*present value of $1@3% for 20 periods
= $1,970,000*0.5537
= $1,090,789
Bond issue price = $586,272 + $1,090,789
= $1,677,061
(k) Bond discount = face value – issue price
= $1,970,000 -$1,677,061
= $292,939