alculate the fair present values of the following bonds, all of which pay intere
ID: 2825799 • Letter: A
Question
alculate the fair present values of the following bonds, all of which pay interest semiannually, have a face value of $1,000, have 8 years remaining to maturity, and have a required rate of return of 12.5 percent.
The bond has a 8.2 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
The bond has a 10.2 percent coupon rate. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
The bond has a 12.5 percent coupon rate. (Do not round intermediate calculations.)
Explanation / Answer
Given details:
Bond 1
Bond 2
Bond 3
FV = Future Value =
-$1,000.00
-$1,000.00
-$1,000.00
Interest rate = Rate or Yield or Interest rate =
12.500000%
12.500000%
12.500000%
Frequency = payment per year =
2
2
2
Number of years =
8
8
8
PMT = Payment or Coupon yearly =
-$82.00
-$102.00
-$125.00
Using financial calculator BA II Plus - Input details:
Bond 1
Bond 2
Bond 3
I/Y = Rate or yield / frequency of coupon in a year =
6.250000
6.250000
6.250000
PMT = Payment = Coupon / frequency =
-$41.00
-$51.00
-$62.50
N = Total number of periods = Number of years x frequency =
16
16
16
FV = Future Value =
-$1,000.00
-$1,000.00
-$1,000.00
CPT > PV = Present Value of the instrument =
$786.41
$885.75
$1,000.00
Given details:
Bond 1
Bond 2
Bond 3
FV = Future Value =
-$1,000.00
-$1,000.00
-$1,000.00
Interest rate = Rate or Yield or Interest rate =
12.500000%
12.500000%
12.500000%
Frequency = payment per year =
2
2
2
Number of years =
8
8
8
PMT = Payment or Coupon yearly =
-$82.00
-$102.00
-$125.00
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