The toe vuue ism000, the stated rate is ?0% Present value of $1: and tho to moft

Question

The toe vuue ism000, the stated rate is ?0% Present value of $1: and tho to mofthe bodiseight years The bond pays interest seimu any Atthe tme of issue, the market ato 6% what a te present ateofthe bond at ne ss edats? 4% 5% 6% 7% 8% 15 0.555 0481 0417 0362 0318 16 0.534 0.458 0.394 0339 0.292 7 0513 0436 0.371 0317 0270 18 0494 0416 0350 0296 0.20 9 0475 036 0331 0277 0.232 Present value of ordinary annuity.os 4% ?% 0% 7% 8% 15 11.118 10.380 9.712 9.108 8569 16 11 6K2 10 R3R 10106 9447 RA51 O A $94911 OB. $49521 O C. $45271 O D. $87,890

Explanation / Answer

Principal 85,000 interest 4250 Market interest rate 4% periods to maturity 16 issue price            94,911 answer option A) $94,911 Calculation of bond issue price Where i= 4.00% t= 16 principal * PV of $1 at 4% for 16yrs = 85,000 * 0.534        =                45,390 interest * PV of ordinary annuity at 4%= 4250 * 11.652 =                49,521 bond issue price                94,911

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