Question

(a) What is the present value of $29,400 due 8 periods from now, discounted at 6%? (Round answer to 2 decimal places, e.g. 25.25.)


(b) What is the present value of $29,400 to be received at the end of each of 12 periods, discounted at 12%? (Round answer to 2 decimal places, e.g. 25.25.)

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Ivanhoe Company is about to issue $298,700 of 6-year bonds paying an 11% interest rate, with interest payable semiannually. The discount rate for such securities is 8%.

Click here to view the factor table.

(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

How much can Ivanhoe expect to receive for the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,575.)

Ivanhoe can expect to receive

$enter a dollar amount to be recieved for the sale of bonds rounded to 0 decimal places

Answer 1

a
Amount due	29400
X PV factor	0.62741	=1/1.06^8
Present value	18445.85
b
Amount	29400
X PV factor	6.19437	=(1-(1.12)^-12)/0.12
Present value	182114.48

c
Ivanhoe can expect to receive	340751
Workings:
	Amount	PV factor 4%	Present value
Semi-annual interest	16428.5	9.38507	154183
Principal	298700	0.6246	186568
			340751
Semi-annual interest	16428.5	=298700*11%/2
PV factor:
Semi-annual interest	9.38507	=(1-(1.04)^-12)/0.04
Principal	0.62460	=1/1.04^12