Exercise 14-2
1.
Maturity
Interest paid
Stated rate
Effective (market) rate
10 years
annually
10%
12%
Interest
$100,000
¥
x
5.65022
*
=
$565,022
Principal
$1,000,000
x
0.32197
**
=
321,970
Present value (price) of the bonds
$886,992
¥
10% x $1,000,000
present value of an ordinary annuity of $1: n=10, i=12%
(Table 4)
**
present value of $1: n=10, i=12%
(Table 2)
2.
Maturity
Interest paid
Stated rate
Effective (market) rate
10 years
semiannually
10%
12%
Interest
$50,000
¥
x
11.46992
*
=
$573,496
Principal
$1,000,000
x
0.31180
**
=
311,800
Present value (price) of the bonds
$885,296
5% x $1,000,000
present value of an ordinary annuity of $1: n=20, i=6%
(Table 4)
**
present value of $1: n=20, i=6%
(Table 2)
3.
Maturity
Interest paid
Stated rate
Effective (market) rate
10 years
semiannually
12%
10%
Interest
$60,000
¥
x
12.46221
*
=
$
747,733
Principal
$1,000,000
x
0.37689
**
=
376,890
Present value (price) of the bonds
$1,124,623
6% x $1,000,000
present value of an ordinary annuity of $1: n=20, i=5%
(Table 4)
**
present value of $1: n=20, i=5%
(Table 2)
4.
Maturity
Interest paid
Stated rate
Effective (market) rate
20 years
semiannually
12%
10%
Interest
$60,000
¥
x
17.15909
*
=
$1,029,545
Principal
$1,000,000
x
0.14205
**
=
142,050
Present value (price) of the bonds
$1,171,595