In: Accounting
Stockman Corp. purchased ten $1000, 8% bonds of Power Source Corporation when the market rate of interest was 6%. Interest is paid semiannually, and the bonds will mature in ten years.
Using the PV function in Excel Superscript ®, compute the price Stockman paid (the present value) for the bond investment. (Assume that all payments of interest and principal occur at the end of the period. Round your answer to the nearest cent.)
Solution:
Particualrs | |
Maturity value | $10,000.00 |
Nos of interest period over life of bond | 20 |
Stated rate per interest period | 4.00% |
effective-interest rate per each interest period | 3.00% |
payment amount per period | $400.00 |
price Stockman paid (the present value) for the bond investment | $11,488 |