Question

Compute the selling price of 9.00%, 15-year bonds with a par value of $270,000 and semiannual interest payments. The annual market rate for these bonds is 6.00%. 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. Round your other final answers to nearest whole dollar amount.)
  

cash flow	table value	present value
$270,000 par (maturity) value
$12,150 interest payment
Price of Bond

Answer 1

Ans:

Cash Flow	Table Value		Present Value
$ 270,000 Par (Maturity) Value	Table Present value of $1 ,i=3%,n=30 periods	0.4120	$ 111,240 {$270,000*0.4120}
$ 12,150 Interest Payment	Table Present value of Annuity $1 ,i=3%,n=30 periods	19.6004	$ 238,144.86 {$12150*19.6004}
Price of Bond			$349,385 (Rounded off)

Working Note:

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

                                                         = $ 270,000 X 9% X ½

                                                         = $ 12,150

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