Trevor issues $80,000 face value of bonds. The bonds pay interest semi-annually

Question

Trevor issues $80,000 face value of bonds. The bonds pay interest semi-annually at a rate of 6% and mature in 6 years. The market rate for bonds of similar riskiness is 5%. How much cash will Trevor receive from issuing these bonds?
Correct answer: 84,103
I have no clue how to find that answer. Trevor issues $80,000 face value of bonds. The bonds pay interest semi-annually at a rate of 6% and mature in 6 years. The market rate for bonds of similar riskiness is 5%. How much cash will Trevor receive from issuing these bonds?
Correct answer: 84,103
I have no clue how to find that answer.
Correct answer: 84,103
I have no clue how to find that answer.

Explanation / Answer

Correct Answer is as below

Face value of Bonds 80000 Statede Rate of Interest 6% Years 6 Samiannual Interest Rate 3.00% Market rate of Interst 5% Samiannual Market Interest Rate 2.50% Samiannual Interest paid ( 80000 X 6%/2) 2400 Annuaity value of 2.5% for 12 Time 10.2577 PV of 2.5% for 12 time 0.74356 ( See from table) 1 PV of Bonds Maturity Amount $80000x .74356 (pv factor for 12 time for 2.5%) 59485 2 PV of Interst Payment 24618.48 Inerst $ 2400 X10.2577 (Pv of annuity of 2.5% for 12 time) Ans Price of Bond 84103 Price of Bonds = Present value of a bond's interest payments, PLUS Present value of a bond's maturity amount.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.