Complete the below table to calculate the price of a $1.3 million bond issue und

Question

Complete the below table to calculate the price of a $1.3 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 16 years, interest paid annually, stated rate 10%, market rate 12%

Table value are based on:

N = ?

I = ?

Cash Flow……………Amount………..Present Value

Interest………………(? Amount)………(? PV)

Principal………….(? amount)………….(?PV)

    Price of Bonds………. ?

2 - Maturity 7 years, interest paid semiannually, stated rate 10%, market rate 12%

Table value are based on:

N =?

I =?

Cash Flow……………Amount………..Present Value

Interest………………(? Amount)………(? PV)

Principal………….(? amount)………….(?PV)

    Price of Bonds………. ?

3 - Maturity 7 years, interest paid semiannually, stated rate 12%, market rate 10%

Table value are based on:

N =?

I =?

Cash Flow……………Amount………..Present Value

Interest………………(? Amount)………(? PV)

Principal………….(? amount)………….(?PV)

    Price of Bonds………. ?

4 - Maturity 15 years, interest paid semiannually, stated rate 12%, market rate 10%

Table value are based on:

N =?

I =?

Cash Flow……………Amount………..Present Value

Interest………………(? Amount)………(? PV)

Principal………….(? amount)………….(?PV)

    Price of Bonds………. ?

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

Table value are based on:

N =?

I =?

Cash Flow……………Amount………..Present Value

Interest………………(? Amount)………(? PV)

Principal………….(? amount)………….(?PV)

    Price of Bonds………. ?

Explanation / Answer

1) Bond issue          1,300,000 N= 16 I = 12% cashflow          1,300,000 interest              130,000 1300000*10% PV annuity factor 6.9740 (16 yrs 12%) PV of interest              906,620 PV of interest (16 yrs 12%) 0.1631 PF of cashflow 212030 Price of bond          1,118,650 2) N=7*2=14 i=12/2 =6 cashflow          1,300,000 Interest                65,000 1300000*5% PV annuity factor 9.29498 PV of interest        604,173.70 PV of interest 0.4423 PF of cashflow              574,990 Price of bond          1,179,164 3) N=7*2=14 i=10/2 =5 cashflow          1,300,000 Interest 78000 1300000*6% PV annuity factor 9.89864 PV of interest        772,093.92 PV of interest 0.50506 PF of cashflow              656,578 Price of bond          1,428,672 4) N=15*2=30 i=10/2 =5 cashflow          1,300,000 Interest 78000 1300000*6% PV annuity factor 15.3724 PV of interest    1,199,047.20 PV of interest 0.23137 PF of cashflow              300,781 Price of bond          1,499,828 5) N=15*2=30 i=12/2 =6 cashflow          1,300,000 Interest 78000 1300000*6% PV annuity factor 13.7648 PV of interest    1,073,654.40 PV of interest 0.17411 PF of cashflow              226,343 Price of bond          1,299,997

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