Miller Mining has $30 million in land value and $15 in mortgage bonds issued on the property.

Miller Mining part 1

Miller Mining has $30 million in land value and $15 in mortgage bonds issued on the property. These bonds were originally issued at par ($1000), but are now selling today (April, 2010) based on a 7.75%, compounded semi-annually, market rate of return. The bonds have a stated interest rate of 8% and mature on January 1, 2020. The bonds pay interest semi-annually on July 1 and January 1 each year. Suppose that an investor buys a $1,000 face value bond on April 1, 2010.

What dollar amount will the investor pay to the seller on April 1? (Do not include the dollar sign($) in your response. Enter your answer in the following format: X,XXX)

Solutions

Expert Solution

The dollar amount investor would pay to the seller on April 1 is computed by using the PRICE function in Excel sheet as follows-

For using the PRICE formula follow the given instructions-

Microsoft office Excel > Formulas > Financial > PRICE

The above computation provide the price of bond as 101.67% of the par value.

Hence, the dollar amount investor would pay to the seller on April 1 = Par value * 101.67%

= $1,000 * 101.67%

= $1,016.70 or 1,016.70

jeff jeffy answered 1 year ago

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