and the tomado-a glant outdoor vortex In whlch rlders spin In progresslvely smal

Question

and the tomado-a glant outdoor vortex In whlch rlders spin In progresslvely smaller and faster clrcles until they drop through a small tunnel at the bottom. 10.00 points Required: 1-a. If the market rate is 6%, calculate the issue price. mlllions.) E of 1. P of $1. EV of1. and Py to 31 Use appropriate factor s from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in Bond Characteristics Face amount Interest payment Market interest rate Periods to maturity Issue price Amount $ 26,000,000 3% 20 14,396,090 1-b. The bonds will issue at Face amount A Dscount A Premiurn

Explanation / Answer

1a market rate 6% face amount 26000000 interest payment 910000 (26000000*7%/2)=910000 market interest rate 3% period of maturity 20 with excel formula issue price 27934078 27934072 PV of face amount = 26000000*PVIF(3%,20) = 26000000*0.553676= 14395576 PV of interest =910000*PVIFA(3%, 20) = 910000*14.877475 = 13538502 27934078 1-b issue price > face amount. Therefore at a premium 2a market rate 7% face amount 26000000 interest payment 910000 market interest rate 4% period of maturity 20 issue price 26000000 PV of face amount = 26000000*PVIF(3.5%,20) = 26000000*0.502566 = 13066716 PV of interest =910000*PVIFA(3.5%, 20) = 910000*14.212400 = 12933284 26000000 2-b issue price = face amount. Therefore at face amount 3a market rate 8% face amount 26000000 interest payment 910000 market interest rate 4% period of maturity 20 with excel formula issue price 24233519 24233258 PV of face amount = 26000000*PVIF(4%,20) = 26000000*0.456397= 11866322 PV of interest =910000*PVIFA(4%, 20) = 910000*13.590326 = 12367197 24233519 3-b issue price

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