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.): 1. Maturity 15 years, interest paid annually, stated rate 8%, effective (market) rate 10% 2. Maturity 15 years, interest paid semiannually, stated rate 8%, effective (market) rate 10% 3. Maturity 5 years, interest paid semiannually, stated rate 10%, effective (market) rate 8% 4. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 8% 5. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 10%

Explanation / Answer

1) Table values are based on: n= 10% i= 15 Cash flow amount PV interest 120000 912730 principal 1500000 359085 price of bonds 1271815 2) Table values are based on: n= 5% i= 30 Cash flow amount PV interest 60000 922347 principal 1500000 347070 price of bonds 1269417 3) Table values are based on: n= 4% i= 10 Cash flow amount PV interest 75000 608318 principal 1500000 1013340 price of bonds 1621658 4) Table values are based on: n= 4% i= 20 Cash flow amount PV interest 75000 1019275 principal 1500000 684585 price of bonds 1703860 5) Table values are based on: n= 5% i= 20 Cash flow amount PV interest 75000 934666 principal 1500000 565335 price of bonds 1500000

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