TABLE 2 Present Value of $1 $1 n/i 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
ID: 2431547 • Letter: T
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TABLE 2 Present Value of $1 $1 n/i 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 8.0% 1 0.99010 0.98522 0.98039 0.97561 0.97087 0.96618 0.96154 0.95694 095238 094787 0.94340 0.93458 0.92593 091743 0.90909 0.90090 0.89286 0.88496 2 0.98030 0.97066 0.96117 0.95181 0.94260 0.93351 0.92456 0.91573 0.90703 0.89845 0.89000 0.87344 0.85734 0.84168 0.82645 0.81162 0.79719 0.78315 3 0.97059 0.95632 0.94232 0.92860 0.91514 0.90194 0.88900 0.87630 0.86384 0.85161 0.83962 0.81630 0.79383 0.77218 0.751310.73119 0.71178 0.69305 4 0.96098 0.94218 0.92385 0.90595 0.88849 0.87144 0.85480 0.83856 0.82270 0.80722 0.79209 0.76290 0.73503 0.70843 0.68301 0.65873 0.63552 0.61332 5 0.95147 0.92826 0.90573 0.88385 0.86261 0.84197 0.82193 0.80245 0.78353 0.76513 0.74726 0.71299 0.68058 064993 0.62092 0.59345 0.56743 0.54276 6 0.94205 0.91454 0.88797 0.86230 0.83748 0.81350 0.79031 0.76790 0.74622 0.72525 0.70496 0.666340.63017 0.59627 0.56447 0.53464 0.50663 0.48032 7 0.93272 0.90103 0.87056 0.84127 0.81309 0.78599 0.75992 0.73483 0.71068 0.68744 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.42506 8 0.92348 0.88771 0.85349 0.82075 0.78941 0.75941 0.73069 0.70319 0.67684 0.65160 0.62741 0.58201 0.54027 050187 0.46651 0.43393 0.40388 0.37616 9 0.91434 0.87459 0.83676 0.80073 0.76642 0.73373 0.70259 0.67290 0.64461 0.61763 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 0.360610.33288 10 0.90529 0.86167 0.82035 0.78120 0.74409 0.70892 0.67556 0.64393 0.61391 0.58543 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.29459 1? 0.89632 0.84893 0.80426 0.76214 0.72242 0.68495 0.64958 0.61620 0.58468 0.55491 0.52679 0.47509 0.42888 0.38753 0.35049 0.31728 0.28748 0.26070 12 0.88745 0.83639 0.78849 0.74356 0.70138 0.66178 0.62460 0.58966 0.55684 0.52598 0.49697 0.44401 0.39711 0.35553 0.31863 0.28584 0.25668 0.23071 13 0.87866 0.82403 0.77303 0.72542 0.68095 0.63940 0.60057 0.56427 0.53032 0.49856 0.46884 0.41496 0.36770 0.32618 0.28966 0.25751 0.22917 0.20416 14 0.86996 0.81185 0.75788 0.70773 0.66112 0.61778 0.57748 0.53997 0.50507 0.47257 0.44230 0.38782 0.34046 0.29925 0.26333 0.23199 0.20462 0.18068 15 0.86135 0.79985 0.74301 0.69047 0.64186 0.59689 0.55526 0.51672 0.48102 0.44793 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.15989 6 0.85282 0.78803 0.72845 0.67362 0.62317 0.57671 0.53391 0.49447 0.45811 0.42458 0.39365 0.33873 0.29189 0.25187 0.21763 0.18829 0.16312 0.14150 17 0.84438 0.77639 0.71416 0.65720 0.60502 0.55720 0.513370.47318 043630 0.40245 0.37136 0.31657 0.27027 0.23107 0.19784 0.16963 0.14564 0.12522 18 0.83602 0.76491 0.70016 0.64117 0.58739 0.53836 0.49363 0.45280 0.41552 0.38147 0.35034 0.29586 0.25025 0.21199 0.17986 0.15282 0.13004 0.11081 19 0.82774 0.75361 0.68643 0.62553 0.57029 0.52016 0.47464 0.43330 0.39573 0.36158 0.33051 0.27651 0.23171 0.19449 0.16351 0.137680.11611 0.09806 20 0.81954 0.74247 0.67297 0.61027 0.55368 0.50257 0.45639 0.41464 0.37689 0.34273 0.31180 0.25842 0.21455 0.17843 0.14864 0.12403 0.10367 0.08678 21 0.81143 0.73150 0.65978 0.59539 0.53755 0.48557 0.43883 0.39679 0.35894 0.32486 0.29416 0.24151 0.19866 0.16370 0.13513 0.11174 0.09256 0.07680 22 0.80340 0.72069 0.64684 0.58086 0.52189 0.46915 0.42196 0.37970 0.34185 0.30793 0.27751 0.22571 0.18394 0.15018 0.12285 0.10067 0.08264 0.06796 23 0.79544 0.71004 0.63416 0.56670 0.50669 0.45329 0.40573 0.36335 0.32557 0.29187 0.26180 0.21095 0.17032 0.13778 0.11168 0.09069 0.07379 0.06014 24 0.78757 0.69954 0.62172 0.55288 0.49193 0.43796 0.39012 0.34770 0.31007 0.27666 0.24698 0.19715 0.15770 0.12640 0.10153 0.08170 0.06588 0.05323 25 0.77977 0.68921 0.60953 0.53939 0.47761 0.42315 0.37512 0.33273 0.29530 0.26223 0.23300 0.18425 0.14602 0.11597 0.09230 0.07361 0.05882 0.04710 2 30 0.74192 0.63976 0.55207 0.47674 0.41199 0.35628 0.30832 0.26700 0.23138 0.20064 0.17411 0.13137 0.09938 0.07537 0.05731 0.04368 0.03338 0.02557 35 0.70591 0.59387 0.50003 0.42137 0.35538 0.29998 0.25342 0.21425 0.18129 0.15352 0.13011 0.09366 0.06763 0.04899 0.03558 0.02592 0.01894 0.01388 40 0.67165 0.55126 0.45289 0.37243 0.30656 0.25257 0.20829 0.17193 0.14205 0.11746 0.09722 0.06678 0.04603 0.03184 0.02209 0.01538 0.01075 0.00753 45 0.63905 0.51171 0.41020 0.32917 0.26444 0.21266 0.17120 0.13796 0.11130 0.08988 0.07265 0.04761 0.03133 0.02069 0.01372 0.00913 0.00610 0.00409 50 0.60804 0.47500 0.37153 0.29094 0.22811 0.17905 0.14071 0.11071 0.08720 0.06877 0.05429 0.03395 0.02132 0.01345 0.00852 0.00542 0.00346 0.00222 2Explanation / Answer
Issues $ 20,000,000 of 7% bonds in eight years, with interest payable semiannually.
Bonds issues = $ 20,000,000
Interest on bonds = $ 700,000 ( 20,000,000*7%*1/2)
Market Rate = 3%( 6%*1/2)
Time = 16 ( 8*2)
Present Value of Bonds
P.V = $20,000,000*PV(3%,16) + $700,000*PVA(3%,16)
= $ 20,000,000* 0.62317 + $700,000* 12.56110
= $ 12,463,400 + $ $8,792,770
= $21,256,170
Issue price is $21,256,170
Therefore bonds issues at premium because issue price of bonds is greater than face value of the bonds.
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