Complete the below table to calculate the price of a $2.0 million bond issue und

Question

Complete the below table to calculate the price of a $2.0 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)

Maturity 15 years, interest paid annually, stated rate 10%, market rate 11%

Maturity 8 years, interest paid semiannually, stated rate 10%, market rate 11%

Maturity 8 years, interest paid semiannually, stated rate 12%, market rate 9%

Maturity 20 years, interest paid semiannually, stated rate 10%, market rate 9%

Maturity 10 years, interest paid semiannually, stated rate 10%, market rate 11%

Explanation / Answer

PVIF PV of PVIFA Interest -$ PV of Price of Bond Principal ($ 2m) Interest (total PV) Maturity 15 years, interest paid annually, stated rate 10%, market rate 11% 0.209 418000 7.1909 200000 1438180 1856180 (11,15) (11,15) (annual) Maturity 8 years, interest paid semiannually, stated rate 10%, market rate 11% 0.4246 849200 10.4622 100000 1046220 1895420 (5.5,16) (5.5,16) (half yearly) Maturity 8 years, interest paid semiannually, stated rate 12%, market rate 9% 0.4945 989000 11.234 120000 1348080 2337080 (4.5,16) (4.5,16) (half yearly) Maturity 20 years, interest paid semiannually, stated rate 10%, market rate 9% 0.1719 343800 18.4016 100000 1840160 2183960 (4.5,40) (4.5,40) (half yearly) Maturity 10 years, interest paid semiannually, stated rate 10%, market rate 11% 0.3427 685400 11.9504 100000 1195040 1880440 (5.5,20) (5.5,20) (half yearly)

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