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A eight-year bond, with par value equals $1,000, pays 10% annually. If similar b

ID: 2778387 • Letter: A

Question

A eight-year bond, with par value equals $1,000, pays 10% annually. If similar bonds are currently yielding 9% annually, what is the market value of the bond? Use semi-annual analysis. Use Appendix B and Appendix D. (Round "PV Factors" to 3 decimal places, intermediate calculations and final answer to 2 decimal places.)


rev: 07-23-2011

$1,055.70

$1,205.70

$1,005.70

$1,355.70

A eight-year bond, with par value equals $1,000, pays 10% annually. If similar bonds are currently yielding 9% annually, what is the market value of the bond? Use semi-annual analysis. Use Appendix B and Appendix D. (Round "PV Factors" to 3 decimal places, intermediate calculations and final answer to 2 decimal places.)

Explanation / Answer

Market Value of Bond   = C*[1-(1/1+i)n]/I +M/(1+i)n

                                                =50*[1-1/1.045)16]/.045 + 1000/(1.045)16

                                                        =50*(1-.494)/.045) +1000/2.02    

                                                =50*11.222 + 494.559

                                                = 561.111+494.559

                                                = 1055.7

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