Bond Homework Solutions

Bond Homework Solutions - Bond Homework Problem 1 Annual...

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Bond Homework Problem 1 $80,000 A. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 20 periods @ 10% (effective annual rate) $80,000 8.51356 $681,084.80 Present Value of $1,000,000 Maturity Pmt. 1. due in 20 periods @ 10% (effective annual rate) $1,000,000 0.14864 $148,640.00 Selling Price of the Bond $829,724.80 2. B. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 20 periods @ 9% (effective annual rate) $80,000 9.12855 $730,284.00 Present Value of $1,000,000 Maturity Pmt. 1. due in 20 periods @ 9% (effective annual rate) $1,000,000 0.17843 $178,430.00 Selling Price of the Bond $908,714.00 2. C. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 20 periods @ 6% (effective annual rate) $80,000 11.46992 $917,593.60 Present Value of $1,000,000 Maturity Pmt. 1. due in 20 periods @ 6% (effective annual rate) $1,000,000 0.31180 $311,800.00 Selling Price of the Bond $1,229,393.60 2. D. Selling Price of the Bond if Annual Cash Interest Payments: $1,000,000 x 8% (stated annual rate) = Effective Annual Interest Rate = 10% Present Value of $80,000 Interest Pmts. sold at a discount ( effective rate > stated rate ) Effective Annual Interest Rate = 9% Present Value of $80,000 Interest Pmts. sold at a discount ( effective rate > stated rate ) Effective Annual Interest Rate = 6% Present Value of $80,000 Interest Pmts. sold at a premium ( effective rate < stated rate ) Effective Annual Interest Rate = 8% No calculations required -- Effective Interest Rate = Stated Interest Rate 1. Bond will sell at Par 2. Selling Price of the Bond = $1,000,000
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Bond Homework Problem 2 $90,000 A. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 10 periods @ 10% (effective annual rate) $90,000 6.14457 $553,011.30 Present Value of $1,000,000 Maturity Pmt. 1. due in 10 periods @ 10% (effective annual rate) $1,000,000 0.38554 $385,540.00 Selling Price of the Bond $938,551.30 2. B. Selling Price of the Bond if C. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 10 periods @ 8% (effective annual rate) $90,000 6.71008 $603,907.20 Present Value of $1,000,000 Maturity Pmt. 1. due in 10 periods @ 8% (effective annual rate) $1,000,000 0.46319 $463,190.00 Selling Price of the Bond $1,067,097.20 2.
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Bond Homework Solutions - Bond Homework Problem 1 Annual...

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