Question

FGX Inc. is issuing bonds to finance a new project in Kansas. These bonds are being offered with a face value of $1000, a coupon rate of 8% per year (paid semiannually), and a maturity of 10 years. Find the pure price of each bond if the current market interest rate for similar financial assets is 5% per year (compounded semiannually). Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas. Show all math, no abreviated formulas. For example do not say P/A or F/A actually write out the formula and solve for the answer. An exel table would be nice

Answer #1

The price of the bond is calculated with the use of following EXCEL table (as required):

Payment Period | Cash Outflow | Discounted Cash Ouftlow [(Cash Outflow)/(1+Current Market Interest/2)^Payment Period] |

1 | 40 | 39.02 |

2 | 40 | 38.07 |

3 | 40 | 37.14 |

4 | 40 | 36.24 |

5 | 40 | 35.35 |

6 | 40 | 34.49 |

7 | 40 | 33.65 |

8 | 40 | 32.83 |

9 | 40 | 32.03 |

10 | 40 | 31.25 |

11 | 40 | 30.49 |

12 | 40 | 29.74 |

13 | 40 | 29.02 |

14 | 40 | 28.31 |

15 | 40 | 27.62 |

16 | 40 | 26.94 |

17 | 40 | 26.29 |

18 | 40 | 25.65 |

19 | 40 | 25.02 |

20 | 1040 | 634.68 |

Pure Price of
Bond |
$1,233.84 |

Pure Price of Bond is **$1,233.84**
(**answer**)

____

**Notes:**

The pure price of bonds is the sum total of all discounted cash outflows (column C of the table)

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