Question

Issue Price

The following terms relate to independent bond issues:

1. 530 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments
2. 530 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments
3. 900 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments
4. 2,160 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

Selling price for each bond issue is as calculated below:

a.

Table value are based on:
n= 5
i= 10%
Cash Flow	Table Value	Amount	Present Value
Par (maturity value)	0.6209	530,000	329,088
Interest (annuity)	3.7908	42,400	160,729
Issue Price			489,818

b.

Table value are based on:
n= 10
i= 5%
Cash Flow	Table Value	Amount	Present Value
Par (maturity value)	0.6139	530,000	325,374
Interest (annuity)	7.7217	21,200	163,701
Issue Price			489,075

c.

Table value are based on:
n= 20
i= 5%
Cash Flow	Table Value	Amount	Present Value
Par (maturity value)	0.3769	530,000	199,751
Interest (annuity)	12.4622	21,200	264,199
Issue Price			463,950

d.

Table value are based on:
n= 30
i= 5%
Cash Flow	Table Value	Amount	Present Value
Par (maturity value)	0.2314	530,000	122,630
Interest (annuity)	15.3725	31,800	488,844
Issue Price			611,474