Issue Price The following terms relate to independent bond issues: a. 700 bonds;

Question

Issue Price

The following terms relate to independent bond issues:

a. 700 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments

b. 700 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments

c. 900 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments

d. 2,180 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments

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.

Explanation / Answer

Particulars Bond A Bond B Bond C Bond D Coupn rate 8 8 8 12 Coupn Rate / period 8 8/2=4 8/2=4 12/2=6 Int Payment Annual Semi Annual Semi Annual Semi Annual periods 5*1 = 5 5*2 =10 10*2 = 20 15*2 = 30 Disc Factor 10/1 = 10 10/2 = 5 10/2 = 5 10/2 = 5 Maturity Value 1000 1000 1000 500 PV of All Int Payments 303.26 308.87 498.49 461.17 PV of Maturity Value 620.92 620.92 385.54 119.70 Price of Bond Today 924 930 884 581

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