Complete the below table to calculate the price of a $1.5 million bond issue und

Question

Complete the below table to calculate the price of a $1.5 million bond issue under each of the following independent assumptions (FV of $1. PV of $1. FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.Enter your answers in whole dollars.): , Maturity 15 years, interest paid annually, stated rate 8%, market rate 12% Amour, Present Interest Principal Price of bonds Maturity 9 years, interest paid semiannually, stated rate 10%. market rate 12% Cash Flow Interest Principal Value Price of bonds Maturity 5 years, interest paid semiannually, stated rate 12%, market rate 10% 3. Cash Flow Interest Principal Amount Present Value Price o bonds

Explanation / Answer

Price of Bond= Present value of Coupon payments + present Value of redemption amount

1) Price= Interest*Present Value Annuity Factor for 15years @12%+ Redemption amount*Present value factor @12% for 15th year

=1,20,000*6.8109+15,00,000*0.18270

=$10,91,358

2) Price=Interest*Present Value Annuity Factor for 18years @6%+ Redemption amount*Present value factor @6% for 18th year

=75,000*10.8276+15,00,000*0.35034

=13,37,580

3) Price=Interest*Present Value Annuity Factor for 10years @5%+ Redemption amount*Present value factor @5% for 10th year

=90,000*7.7217+15,00,000*0.61391

=16,15,818

4)Price=Interest*Present Value Annuity Factor for 30years @5%+ Redemption amount*Present value factor @5% for 30th year

=60,000*15.3725 +15,00,000* 0.2314

=12,69,450

5)Price=Interest*Present Value Annuity Factor for 30years @6%+ Redemption amount*Present value factor @6% for 30th year

=60,000*13.7648+ 15,00,000*0.1741

=10,87,038

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