On August 1, 2002, Bonnie purchased $15,000 of Huber Co.\'s 10%, 20-year bonds a

Question

On August 1, 2002, Bonnie purchased $15,000 of Huber Co.'s 10%, 20-year bonds at face value. Huber Co. has paid the semiannual interest due on the bonds regularly. On August 1, 2010, market rates of interest had fallen to 8%, and Bonnie is considering selling the bonds.

Required:

Using the present value tables (Table 6-4 and Table 6-5), calculate the market value of Bonnie’s bonds on August 1, 2010. (Round pv factor to 4 decimal places and the final answer to 2 decimal places. Omit the "$" sign in your response.)

Market value $

Explanation / Answer

15,000*.08%/2=600 semianual interest starts on Aug 1 2010 time frame-8yers paased 20-8=12 number of interest payments left n=12*2=24 i=8%/2=4% per period table 6-1 present value of 1 15000*.39012=5868 table 6-5 present value of an annuity due of 1 ( because payments require at the beg. of the month) 600*15.85684=9514.10 market value of the bond=9514.10+5868=15382.10

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