Question

the Lone Star Company has $1000 par value bonds outstanding at 10 percent interest. the bonds...

the Lone Star Company has $1000 par value bonds outstanding at 10 percent interest. the bonds will mature in 20 years. use appendix B and appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
compute the price of the bonds if the present yield to maturity is 7 percent, 9 percent, 12 percent.

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Answer #1
n = 40
I = 3.5%
Cashflows Amount PVF Present value
Semi annual interest 50 21.35507 1067.754
Maturity value 1000 0.252572 252.572
Price of bonds 1320.326
n = 40
I = 4.50%
Cashflows Amount PVF Present Values
Semi annual interest 50 18.40158 920.079
Maturity value 1000 0.171929 171.929
Price of bonds 1092.008
n = 40
I = 6%
Cashflows Amount PVF Present Values
Semi annual interest 50 15.0463 752.315
Maturity value 1000 0.097222 97.222
Price of bonds 849.537
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