This Question: 1 pt 19 of 21 (0 complete) ? This Quiz: 25 pts possible On Januar

Question

This Question: 1 pt 19 of 21 (0 complete) ? This Quiz: 25 pts possible On January 1, 2016, bonds with a face value of $90,000 were sold. The bonds mature on January 1, 2026. The face interest rate is 8%. The bonds pay interest semiannually on July 1 and January 1 The market rate of interest is 12%. What is the market price of the bonds? The present value of $1 for 20 periods at 6% is 0.312. The present value of an ordinary annuity of $1 for 20 periods at 6% is 1 1 .47. The present value of $1 for 20 periods at 4% is 0456. The present value of an ordinary annuity of $1 or 20 periods at 4% is 13 5 Round your ina. answer the nearest dollar. ? A. S89.964. ( B. S69372. OC. $93,600 O D. $90,000

Explanation / Answer

Answer is B. $ 69,372

Explanation:

Market price: Present value of interest of $ 3600 (i.e. $90000*4%) for 20 periods at 6% (Annuity i.e.11.47) 41292 Present value of maturity value of bonds of $90000 at the year-10 (PVF at 12% i.e.0.312) 28080 Market price: 69372

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