This Question: 1 pt 41 of 5 (0 complete) 4 This Quiz: 5 pls interest rates deter

Question

This Question: 1 pt 41 of 5 (0 complete) 4 This Quiz: 5 pls interest rates determine the present value of future amounts (Round to the nearest dollar.) ?(ock the icon to view Present Value of $1 table) ? Click the con to view Present Value of Odary Annuity of $1 table. (Click the icon to view Future Value of 51 table) B Cick the icon to view Future Value of Cidinary Arinuaty of $1 table ) Read the requiements Requirement 1. Determine the present value o 10-year bonds payable with face value of 590 000 and stated interest rate 0 % paid semiannual y The market rate nterest is 10% at ssuance ound intermediary calculations and inal answer to the nearest whole dollar Present Value When market rate of interest is 10% annually Requirement 2. Same bonds payable as requrement 1 ut the mark et "terest rate is 16%.(Round intemediary calculations and final answer to the nearest whole d Present Value When market rate of Interest es 16% amually as n equa e ent t but thc market intern t rate s 8% R undin ermedi y c culations and final answer to he nearest whole d Present Value When market rite of mterest is:8% Enter neat

Explanation / Answer

Requirement 1 - Present Value of Bond = $ 90,000

Coupon rate                                      = 5%

Coupon Amount = $ 90000 x5% = $ 4500

Face Value                                        = $ 90000

r = 5%

Period = 10 Years x 2                       = 20 Years

Present Value of Bond = $90,000(PVF 5%,20 Years)+ $4500(PVAF 5%, 20Years)

= ($90000x0.37688) + ( $4500 x 12.4622)

Present Value of Bond = $ 90,000   

Requirement 2 - Present Value of Bond = $ 63,491

Coupon rate                                      = 5%

Coupon Amount = $ 90000 x5%     = $ 4500

Face Value                                        = $ 90000

r                                                        = 8%

Period = 10 Years x 2                       = 20 Years

Present Value of Bond = $90,000(PVF 8%,20 Years)+ $4500(PVAF 8%, 20Years)

= ($90000x0.21455) + ( $4500 x 9.8181)

Present Value of Bond = $ 63,491   

Requirement 3 - Present Value of Bond = $ 1,02,231

Coupon rate                                      = 5%

Coupon Amount = $ 90000 x5%     = $ 4500

Face Value                                        = $ 90000

r                                                        = 4%

Period = 10 Years x 2                       = 20 Years

Present Value of Bond = $90,000(PVF 4%,20 Years)+ $4500(PVAF 4%, 20Years)

= ($90000 x 0.45639) + ( $4500 x 13.5903)

Present Value of Bond = $ 1,02,231

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