1. Calculate the price of a bond using tables Bond Pricing- Excel FILE HOME INSE

Question

1. Calculate the price of a bond using tables Bond Pricing- Excel FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIE Sign In Paste B 1 u.: ?».. Algnrmert Number. Conditional Format as. Cell Cells Editing Formatting Table Styles Styles Font Xf On January 1, Ruiz Company issued bonds as follows: 1 IOn Januaty 1, Ruiz Company issued bonds as follows: Face Value: Number of Years: Stated Interest Rate: Interest payments per year 500,000 15 796 9 Required: 10 1) Calculate the bond selling price given the two market interest rates below. 11 Use formulas that reference data from this worksheet and from the appropriate future or

Explanation / Answer

1a) Halfly interest payment FV 500000 Years 15 30 Interest rate 7% 3.50% Market rate 9% 4.50% PV of Face Value: FV * PVIF(mr , n) 500000*PVIF(4.5%,30) 500000 * 0.2670 133500 PV of Interest payment Half year interest * PVIFA(mr,n) (500000*3.5%) * PVIFA(4.5%,30) 17500 * 16.2889 285055.75 BONDS selling price 133500+285055.75 418555.75 1b) Halfly interest payment FV 500000 Years 15 30 Interest rate 7% 3.50% Market rate 6% 3.00% PV of Face Value: FV * PVIF(mr , n) 500000*PVIF(3%,30) 500000 * 0.4120 206000 PV of Interest payment Half year interest * PVIFA(mr,n) (500000*3.5%) * PVIFA(3%,30) 17500 * 19.6004 343007 BONDS selling price 206000+343007 549007 2) The bond in (a) sold at a Discount of $81444.25 The bond in (b) sold at a Premium of $49007 3) The above is through excel calculation.

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