Solution: Hartford Telephone Company a) Par Value $1,000 Interest 11% Present Va
ID: 2691451 • Letter: S
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Solution: Hartford Telephone Company a) Par Value $1,000 Interest 11% Present Value of Interest Payments = A * PVIFA Time to Maturity=n 30 Present Value of Interest Payments = Yield to Maturity = i 14% Present Value of Principal Payment at Maturity = FV * PVIF Annuity = A Present Value of Principal Payment at Maturity = PVIFA Total Present Value or Price of the Bond = PVIF b) Par Value $1,000 Interest 11% Present Value of Interest Payments = A * PVIFA Time to Maturity=n 15 Present Value of Interest Payments = Yield to Maturity = i 14% Present Value of Principal Payment at Maturity = FV * PVIF Annuity = A Present Value of Principal Payment at Maturity = PVIFA Total Present Value or Price of the Bond = PVIF c) Par Value $1,000 Interest 11% Present Value of Interest Payments = A * PVIFA Time to Maturity=n 1 Present Value of Interest Payments = Yield to Maturity = i 14% Present Value of Principal Payment at Maturity = FV * PVIF Annuity = A Present Value of Principal Payment at Maturity = PVIFA Total Present Value or Price of the Bond = PVIFExplanation / Answer
PVA = A × PVIFA (n = 30, i = 14%) Appendix D
PVA = $110 × 7.003 = $770.33
PV = FV × PVIF (n = 30, i = 14%) Appendix B
PV = $1,000 × 0.02 = $20
$770.33
20.00
$790.33
b. 15 years to maturity
PVA = A × PVIFA (n = 15, i = 14%) Appendix D
PVA = $110 × 6.142 = $675.62
PV = FV × PVIF (n = 15, i = 14%) Appendix B
PV = $1,000 × .140 = $140
$675.62
140.00
$815.62
c. 1 year to maturity
PVA = A × PVIFA (n = 1, i=14%) Appendix D
PVA = $110 × .877 = $96.47
PV = FV × PVIF (n =1, i = 14%) Appendix B
PV = $1,000 × .877 = $877.00
$ 96.47
877.00
$973.47PVA = A × PVIFA (n = 30, i = 14%) Appendix D
PVA = $110 × 7.003 = $770.33
PV = FV × PVIF (n = 30, i = 14%) Appendix B
PV = $1,000 × 0.02 = $20
$770.33
20.00
$790.33
b. 15 years to maturity
PVA = A × PVIFA (n = 15, i = 14%) Appendix D
PVA = $110 × 6.142 = $675.62
PV = FV × PVIF (n = 15, i = 14%) Appendix B
PV = $1,000 × .140 = $140
$675.62
140.00
$815.62
10-6. (Continued)
c. 1 year to maturity
PVA = A × PVIFA (n = 1, i=14%) Appendix D
PVA = $110 × .877 = $96.47
PV = FV × PVIF (n =1, i = 14%) Appendix B
PV = $1,000 × .877 = $877.00
$ 96.47
877.00
$973.47
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