Question

**SOLVE WITH A TI BAI++ CALCULATOR**

10. You are considering purchasing corporate bonds with a face value of $100,000. The bonds mature in thirty years and carry an eight percent coupon rate, with semiannual payments. How much would you pay for these bonds today if

a. you required an APR of ten percent compounded semiannually?

b. you required an APR of six percent compounded semiannually?

c. you required an APR of eight percent compounded semiannually?

Answer 1

Req a:
Par value of bonds				1000
Semi annual interest				40
PVF at 60th period at 5%				0.053536
Annuity for60th period at 5%				18.92929
Present value of bonds maturity				53.536
present value of interest				757.1716
Price				810.7076
Req b:
Par value of bonds				1000
Semi annual interest				40
PVF at 60th period at 3%				0.169733
Annuity for60th period at 3%				27.67556
Present value of bonds maturity				169.733
present value of interest				1107.022
Price				1276.755
Req c:
Par value of bonds				1000
Semi annual interest				40
PVF at 60th period at 4%				0.09506
Annuity for60th period at 4%				22.62349
Present value of bonds maturity				95.06
present value of interest				904.9396
Price				1000