The Kiwi Shop Company has two bond issues outstanding. Both bonds pay $100 annual interest plus...
The Kiwi Shop Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
What will be the value of each of these bonds when the
going rate of interest is 6%? Assume that there is only one more
interest payment to be made on Bond S. Round your answers to the
nearest cent.
Bond L$ Bond S$
What will be the value of each of these bonds when the
going rate of interest is 10%? Assume that there is only one more
interest payment to be made on Bond S. Round your answers to the
nearest cent.
Bond L$ Bond S$
What will be the value of each of these bonds when the
going rate of interest is 14%? Assume that there is only one more
interest payment to be made on Bond S. Round your answers to the
nearest cent.
Bond L$ Bond S$
Homework Answers
1. What will be the value of each of these bonds when the going rate of interest is 6%?
Bond L= 1388.49
Bond S = 1037.74
2. What will be the value of each of these bonds when the going rate of interest is 10%?
Bond L = 1000
Bond S= 1000
3. What will be the value of each of these bonds when the going rate of interest is 14%?
Bond L= 754.31
Bond S= 964.91
Workings:
1.
| NPER | 15.00 | |
| FV | 1000 | |
| PMT | 100.0 | |
| Rate | 6.00% | |
| PV | $1,388.49 | [-pv(rate,nper,pmt,fv,1) |
| NPER | 1.00 | |
| FV | 1000 | |
| PMT | 100.0 | |
| Rate | 6.00% | |
| PV | $1,037.74 | [-pv(rate,nper,pmt,fv,1) |
2.
| NPER | 15.00 | |
| FV | 1000 | |
| PMT | 100.0 | |
| Rate | 10.00% | |
| PV | $1,000.00 | [-pv(rate,nper,pmt,fv,1) |
| NPER | 1.00 | |
| FV | 1000 | |
| PMT | 100.0 | |
| Rate | 10.00% | |
| PV | $1,000.00 | [-pv(rate,nper,pmt,fv,1) |
3.
| NPER | 1.00 | |
| FV | 1000 | |
| PMT | 100.0 | |
| Rate | 14.00% | |
| PV | $964.91 | [-pv(rate,nper,pmt,fv,1) |
| NPER | 15.00 | |
| FV | 1000 | |
| PMT | 100.0 | |
| Rate | 14.00% | |
| PV | $754.31 | [-pv(rate,nper,pmt,fv,1) |
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