Question

Compute the selling price of 10%, 10-year bonds with a par value of $360,000 and semiannual interest payments. The annual market rate for these bonds is 12%. Use present value Table B.1 and Table B.3 in Appendix B. (Round all table values to 4 decimal places, and use the rounded table values in calculations.)

cash flow	table value	present value
$360,000 par (maturity) date
18,000 interest payment
Price of Bond

Answer 1

Ans:

Ans:

Cash Flow	Table Value		Present Value
$ 360,000 Par (Maturity) Value	Table Present value of $1 ,i=6%,n=20 periods	0.3118	$ 112,248     {$360,000*0.3118}
$ 18,000 Interest Payment	Table Present value of Annuity $1 ,i=6%,n=20 periods	11.47	$ 206,460     {$18000*11.4700}
Price of Bond			$318,708

Working Note:

Semi-annual interest payment = par value of bonds X annual rate of interest X ½

                                                         = $ 360,000 X 10% X ½

                                                         = $ 18,000

Hope This Helped ! Let Me Know In Case of Any Queries.

Working Note:

Semi-annual interest payment = par value of bonds X annual rate of interest X ½

                                                         = $ 360,000 X 10% X ½

                                                         = $ 18,000

Hope This Helped ! Let Me Know In Case of Any Queries.