Question

Issue Price

The following terms relate to independent bond issues:

- 650 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments
- 650 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments
- 870 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments
- 2,020 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

**Required:**

Assuming the market rate of interest is 10%, calculate the selling price for each bond issue. If required, round your intermediate calculations and final answers to the nearest dollar.

Situation |
Selling Price of the Bond Issue |

a. | $ |

b. | $ |

c. | $ |

d. | $ |

Answer #1

a.selling price of bond = 924.18

b.selling price of bond=922.78

c.selling price of bond =875.38

d.selling price of bond =1153.72

CALCULATION

FORMULA = C1/(1+r)^{t} + C2/(1+r)^{t} + ------ +
Cn/(1+r)^{t} + FV/(1+r)^{t}

^{C = COUPON}

^{r = stated rate}

^{t = time period}

^{FV = FUTURE VALUE}

a)

SELLING PRICE=80 / (1.1) + 80 / (1.1)^{2} ----- 80 /
(1.1)^{5} + 1000 / (1.1)^{5}

SELLING PRICE = 72.72 +66.116 +60.105 +54.641 +49.674 +620.92

SELLING PRICE = 924.18

b)

SELLING PRICE=40 / (1.05) + 80 / (1.05)^{2} ----- 80 /
(1.05)^{10} + 1000 / (1.08)^{10}

=922.78

c)

SELLING PRICE=40 / (1.05) + 80 / (1.05)^{2} ----- 80 /
(1.05)^{20} + 1000 / (1.08)^{20}

=875.38

d)

SELLING PRICE=60 / (1.05) + 80 / (1.05)^{2} ----- 80 /
(1.05)^{30} + 1000 / (1.08)^{30}

=1153.72

Issue Price
The following terms relate to independent bond issues:
570 bonds; $1,000 face value; 8% stated rate; 5 years; annual
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570 bonds; $1,000 face value; 8% stated rate; 5 years;
semiannual interest payments
860 bonds; $1,000 face value; 8% stated rate; 10 years;
semiannual interest payments
1,990 bonds; $500 face value; 12% stated rate; 15 years;
semiannual interest payments
Use the appropriate present value table:
PV of $1 and PV of Annuity of $1
Required:
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semiannual interest payments
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Use the appropriate
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