Valuing Bonds Using Present Value Use the present value to calculate the issue p

Question

Valuing Bonds Using Present Value

Use the present value to calculate the issue price of a $600,000 bond issue in each of the following independent cases. Assume interest is paid semiannually.

a. A 10-year, 8 percent bond issue; the market interest rate is 10 percent.
$  

b. A 10-year, 8 percent bond issue; the market interest rate is 6 percent.
$  

c. A 10-year, 10 percent bond issue; the market interest rate is 8 percent.
$  

d. A 20-year, 10 percent bond issue; the market interest rate is 12 percent.
$  

e. A 20-year, 10 percent bond issue; the market interest rate is 6 percent.

Explanation / Answer

a. Issue Price=(600000* 0.38554)+(600000*8%*6.7101)=$553408.8

b. Issue Price=(600000* 0.55839)+(600000*8%*6.7101)=$657118.8

c.Issue Price=(600000* 0.46319)+(600000*10%*6.1446)=$646590

d.Issue Price=(600000* 0.10367)+(600000*10%* 8.5136)=$573018

e Issue Price=(600000*0.31180)+(600000*10%*8.5136)=$697896

present value of the bond-taken from a table for the present value of 1 due in n periods, and based on the market interest rate

Present value of interest taken from ordinary annuity

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