Exercise 6-7 What would you pay for a $120,000 debenture bond that matures in 15

Question

Exercise 6-7 What would you pay for a $120,000 debenture bond that matures in 15 years and pays $6,000 a year in interest if you wanted to earn a yield of: Click here to view factor tables 3%? (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, eg. 458,581.) Amount to Pay $ 496? (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Amount to Pays 5%? (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, eg. 458,581.) Amount to Pay Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Yield Amount to be received PV of Amount to be received Amount to pay Yield @ 3% 6000*PVAF (3%,15years) + 120000 * PVF(3%, 15 years) 6000*11.93793 + 120000*0.64186 = 148651 148651 Yield @4% 6000*PVAF (4%,15years) + 120000 * PVF(4%, 15 years) 6000*11.11838 + 120000*0.55526 = 133341 133341 Yield @5% 6000*PVAF (5%,15years) + 120000 * PVF(5%, 15 years) 6000*10.37966 + 120000*0.48102 = 120000 120000

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