The following terms relate to independent bond issues: a. 500 bonds; $1, 000 fac

Question

The following terms relate to independent bond issues: a. 500 bonds; $1, 000 face value; 8% stated rate; 5 years; annual interest payments b. 500 bonds; $1, 000 face value; 8% stated rate; 5 years; semiannual interest payments c. 800 bonds; $1, 000 face value; 8% stated rate; 10 years; semiannual interest payments d. 2, 000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Required Assuming the market rate of interest is 10%, calculate the selling price for each bond issue.

Explanation / Answer

Answer a b c d Face value 1000 1000 1000 500 Stated rate 8.00% 8.00% 8.00% 12.00% Tenure in years 5 5 10 15 Payment mode annually Semi annually Semi annually Semi annually Market return 10.00% 10.00% 10.00% 10.00% Interest paid per year 80 80 80 60 PVIFA of Interest 303.28 617.76 996.96 825.90 PVIF of Principal 621.00 614.00 377.00 87.00 Selling price of each Bond 924.28 1231.76 1373.96 912.90

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