Use the following tables to calculate the present value of a $775,000 6%, 5-year
ID: 2467044 • Letter: U
Question
Use the following tables to calculate the present value of a $775,000 6%, 5-year bond that pays $46,500 interest annually, if the market rate of interest is 7%. Round to the nearest dollar. Present Value of $1 at Compound Interest
Periods 5 % 6 % 7 % 10 %
1 .95238 .94340 .93458 .90909
2 .90703 .89000 .87344 .82645
3 .86384 .83962 .81630 .75132
4 .82270 .79209 .76290 .68301
5 .78353 .74726 .71299 .62092
6 .74622 .70496 .66634 .56447
7 .71068 .66506 .62275 .51316
8 .67684 .62741 .58201 .46651
9 .64461 .59190 .54393 .42410
10 .61391 .55840 .50835 .38554
Present Value of Annuity of $1 at Compound Interest
Periods 5 % 6 % 7 % 10 %
1 .95238 .94340 .93458 .90909
2 1.85941 1.83339 1.80802 1.73554
3 2.72325 2.67301 2.62432 2.48685
4 3.54595 3.46511 3.38721 3.16987
5 4.32948 4.21236 4.10020 3.79079
6 5.07569 4.91732 4.76654 4.35526
7 5.78637 5.58238 5.38929 4.86842
8 6.46321 6.20979 5.97130 5.33493
9 7.10782 6.80169 6.51523 5.75902
10 7.72174 7.36009 7.02358 6.14457
$______
Explanation / Answer
Present value of the bond = annual Interest*PVAF( 7%,5 years) + Maturity Value ( 7%,%years)
= 46500*4.100 + 775000*0.713
= 190650+552575 i.e 743225
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