Issue Price The following terms relate to independent bond issues a. 510 bonds;
ID: 2545941 • Letter: I
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Issue Price The following terms relate to independent bond issues a. 510 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 510 bonds; $1,000 face value; 896 stated rate; 5 years; semiannual interest payments c. 840 bonds; $1,000 face value; 896 stated rate; 10 years; semiannual interest payments d. 1,990 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. Refer to the tables above for present value factors. If required, do not round intermediate calculations and round all final answers to the nearest dollar. Situation ia. b. Selling Price of the Bond Issue 471383 631768 c. C: $1161686 2073282 d.Explanation / Answer
a)Statemnet showing Price of bond when coupon interest is 8%, years to maturity=5 Particulars Time PVf @8% Amount PV Cash Flows (Interest) 1.00 0.9091 80.00 72.73 Cash Flows (Interest) 2.00 0.8264 80.00 66.12 Cash Flows (Interest) 3.00 0.7513 80.00 60.11 Cash Flows (Interest) 4.00 0.6830 80.00 54.64 Cash Flows (Interest) 5.00 0.6209 80.00 49.67 Cash flows (Maturity Amount) 5.00 0.6209 1,000.00 620.90 Current Bond Price 924.16 Price of 510 bonds= 510*924.16= $471321 b)Statemnet showing Price of bond in case of semi annual payment so coupon rate is 4%, years to maturity is 10 years, yield is 5% Particulars Time PVf @5% Amount PV Cash Flows (Interest) 1.00 0.9524 40.00 38.10 Cash Flows (Interest) 2.00 0.9070 40.00 36.28 Cash Flows (Interest) 3.00 0.8638 40.00 34.55 Cash Flows (Interest) 4.00 0.8227 40.00 32.91 Cash Flows (Interest) 5.00 0.7835 40.00 31.34 Cash Flows (Interest) 6.00 0.7462 40.00 29.85 Cash Flows (Interest) 7.00 0.7107 40.00 28.43 Cash Flows (Interest) 8.00 0.6768 40.00 27.07 Cash Flows (Interest) 9.00 0.6446 40.00 25.78 Cash Flows (Interest) 10.00 0.6139 40.00 24.56 Cash flows (Maturity Amount) 10.00 0.6139 1,000.00 613.90 Current Bond Price 922.77 Price of 510 bonds=510*922.77= $470613 c)Statemnet showing Price of bond in case of semi annual payment so coupon rate is 4%, years to maturity is 20 years, yield is 5% Particulars Time PVf @5% Amount PV Cash Flows (Interest) 1.00 0.9524 40.00 38.10 Cash Flows (Interest) 2.00 0.9070 40.00 36.28 Cash Flows (Interest) 3.00 0.8638 40.00 34.55 Cash Flows (Interest) 4.00 0.8227 40.00 32.91 Cash Flows (Interest) 5.00 0.7835 40.00 31.34 Cash Flows (Interest) 6.00 0.7462 40.00 29.85 Cash Flows (Interest) 7.00 0.7107 40.00 28.43 Cash Flows (Interest) 8.00 0.6768 40.00 27.07 Cash Flows (Interest) 9.00 0.6446 40.00 25.78 Cash Flows (Interest) 10.00 0.6139 40.00 24.56 Cash Flows (Interest) 11.00 0.5847 40.00 23.39 Cash Flows (Interest) 12.00 0.5568 40.00 22.27 Cash Flows (Interest) 13.00 0.5303 40.00 21.21 Cash Flows (Interest) 14.00 0.5051 40.00 20.20 Cash Flows (Interest) 15.00 0.4810 40.00 19.24 Cash Flows (Interest) 16.00 0.4581 40.00 18.32 Cash Flows (Interest) 17.00 0.4363 40.00 17.45 Cash Flows (Interest) 18.00 0.4155 40.00 16.62 Cash Flows (Interest) 19.00 0.3957 40.00 15.83 Cash Flows (Interest) 20.00 0.3769 40.00 15.08 Cash flows (Maturity Amount) 20.00 0.3769 1,000.00 376.90 Current Bond Price 875.39 Price of 840 bonds=840*875.39=$735328 d)Statemnet showing Price of bond in case of semi annual payment so coupon rate is 6%, years to maturity is 30 years, yield is 5% Particulars Time PVf @5% Amount PV Cash Flows (Interest) 1.00 0.9524 60.00 57.14 Cash Flows (Interest) 2.00 0.9070 60.00 54.42 Cash Flows (Interest) 3.00 0.8638 60.00 51.83 Cash Flows (Interest) 4.00 0.8227 60.00 49.36 Cash Flows (Interest) 5.00 0.7835 60.00 47.01 Cash Flows (Interest) 6.00 0.7462 60.00 44.77 Cash Flows (Interest) 7.00 0.7107 60.00 42.64 Cash Flows (Interest) 8.00 0.6768 60.00 40.61 Cash Flows (Interest) 9.00 0.6446 60.00 38.68 Cash Flows (Interest) 10.00 0.6139 60.00 36.83 Cash Flows (Interest) 11.00 0.5847 60.00 35.08 Cash Flows (Interest) 12.00 0.5568 60.00 33.41 Cash Flows (Interest) 13.00 0.5303 60.00 31.82 Cash Flows (Interest) 14.00 0.5051 60.00 30.30 Cash Flows (Interest) 15.00 0.4810 60.00 28.86 Cash Flows (Interest) 16.00 0.4581 60.00 27.49 Cash Flows (Interest) 17.00 0.4363 60.00 26.18 Cash Flows (Interest) 18.00 0.4155 60.00 24.93 Cash Flows (Interest) 19.00 0.3957 60.00 23.74 Cash Flows (Interest) 20.00 0.3769 60.00 22.61 Cash Flows (Interest) 21.00 0.3589 60.00 21.54 Cash Flows (Interest) 22.00 0.3418 60.00 20.51 Cash Flows (Interest) 23.00 0.3256 60.00 19.53 Cash Flows (Interest) 24.00 0.3101 60.00 18.60 Cash Flows (Interest) 25.00 0.2953 60.00 17.72 Cash Flows (Interest) 26.00 0.2812 60.00 16.87 Cash Flows (Interest) 27.00 0.2678 60.00 16.07 Cash Flows (Interest) 28.00 0.2551 60.00 15.31 Cash Flows (Interest) 29.00 0.2429 60.00 14.58 Cash Flows (Interest) 30.00 0.2314 60.00 13.88 Cash flows (Maturity Amount) 30.00 0.2314 1,000.00 231.40 Current Bond Price 1,153.75 Price of 1990 bonds=1990*1153.75= $2295963
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