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Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is a. 5 percent. b. 15 percent. Solution: Present Value of Interest Payments                   PVA = A × PVIFA (n = 50, i = 5%)   Present Value of Interest Payments PVA = A × PVIFA (n = 50, i = 15%)

Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is a. 5 percent. b. 15 percent. Solution: Present Value of Interest Payments                   PVA = A × PVIFA (n = 50, i = 5%)   Present Value of Interest Payments PVA = A × PVIFA (n = 50, i = 15%)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is

  1. a. 5 percent.
  2. b. 15 percent.

Solution:

Present Value of Interest Payments

                  PVA = A × PVIFA (n = 50, i = 5%)

 

Present Value of Interest Payments

PVA = A × PVIFA (n = 50, i = 15%)

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