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.):

1. Maturity 15 years, interest paid annually, stated rate 8%, market rate 12%

Table values are based on:

2. Maturity 9 years, interest paid semiannually, stated rate 10%, market rate 12%

3. Maturity 5 years, interest paid semiannually, stated rate 12%, market rate 10%

4. Maturity 15 years, interest paid semiannually, stated rate 8%, market rate 10%

5. Maturity 15 years, interest paid semiannually, stated rate 8%, market rate 12%

Explanation / Answer

Answer:

Price of a bond = Present value of interest payments + Present value of principle

Interest amount = Par value * stated rate

1.

Interest = $1500000* 8% = $120000

PV of interest payment = $120000 * PVIFA(12%,15)

PV of principle = $1500000 * PVIF (12%,15)

2.

Interest = $1500000*10% = $150000

PV of interest payment = $150000 * PVIFA (6%,18)

PV of Principle = $1500000 * PVIF (6%,18)

3.

Interest = $1500000 * 12% = $180000

PV of interest payment = $180000 * PVIFA (5%,10)

PV of Principle = $1500000 * PVIF (5%,10)

4.

Interest = $1500000 * 8% = $120000

PV of interest payment = $120000 * PVIFA (5%,30)

PV of Principle = $1500000 * PVIF (5%,30)

5.

Interest = $1500000 * 8% = $120000

PV of interest payment = $120000 * PVIFA (6%,30)

PV of Principle = $1500000 * PVIF (6%,30)

Note: Since no table is provided, i have rounded up factor value upto 5 decimal places.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.