The Florida Investment Fund buys 60 bonds of the Gator Corporation through a bro

Question

The Florida Investment Fund buys 60 bonds of the Gator Corporation through a broker. The bonds pay 11 percent annual interest. The yield to maturity (market rate of interest) is 12 percent. The bonds have a 10-year maturity. Use Appendix B and Appendix D. Using an assumption of semiannual interest payments:

Compute the price of a bond. (Round "PV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.)

Compute the total value of the 60 bonds. (Round "PV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.)

The Florida Investment Fund buys 60 bonds of the Gator Corporation through a broker. The bonds pay 11 percent annual interest. The yield to maturity (market rate of interest) is 12 percent. The bonds have a 10-year maturity. Use Appendix B and Appendix D. Using an assumption of semiannual interest payments:

Explanation / Answer

Hi,

Please find the answers as follows:

Part A:

Price of the Bond = 1000*PVIF(20,6%) + 55*PVIFA(20,6%) = 942.85

Part B:

Value of 60 Bonds = 942.85*60 = 56571.00

Thanks.

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