On August 1, 2011, Bonnie purchased $21,500 of Huber Co.'s 18%, 16-year bonds at face value....

On August 1, 2011, Bonnie purchased $21,500 of Huber Co.'s 18%, 16-year bonds at face value. Huber Co. has paid the semiannual interest due on the bonds regularly. On August 1, 2019, market rates of interest had fallen to 16%, and Bonnie is considering selling the bonds. Use the present value tables (Table 6-4 and Table 6-5) (Round your PV factors to 4 decimal places.)

Required:
Calculate the market value of Bonnie’s bonds on August 1, 2019. (Round your answer to 2 decimal places.)

Solutions

Expert Solution

Face Value	$21,500
Annual Coupon Rate	18%
Semiannual Coupon Rate	0.09
Semiannual Coupon	$1,935
Time to Maturity Years (16-8)	8
Semiannual Period to Maturity	16
Annual Interest Rate	16%
Semiannual Interest Rate	0.08

Semiannual Coupon	$1,935
PVA (8%, 16)	8.8514
		$17,127.46
Face Value	$21,500
PV (8%, 16)	0.2919
		$ 6,275.85
Market value of Bonnie’s bonds on August 1, 2019		$23,403.31

Face Value	21500
Annual Coupon Rate	0.18
Semiannual Coupon Rate	=B2/2
Semiannual Coupon	=B1*B3
Time to Maturity Years (16-8)	=16-8
Semiannual Period to Maturity	=B5*2
Annual Interest Rate	0.16
Semiannual Interest Rate	=B7/2

Semiannual Coupon	=B4
PVA (8%, 16)	=ROUND(PV(B8,B6,-1),4)
		=B10*B11
Face Value	=B1
PV (8%, 16)	=ROUND(PV(B8,B6,,-1),4)
		=B13*B14
Market value of Bonnie’s bonds on August 1, 2019		=SUM(C12:C15)

ekkarill92 answered 1 year ago

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