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Issue Price The following terms relate to independent bond issues: a. 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments c. 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments d. 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Use the appropriate present value table: PV of $1 and PV of Annuity of $1 Required: Assuming the market rate of interest is 10%, calculate the selling price for each bond issue. If required, round all calculations to the nearest dollar. Situation Selling Price of the Bond Issue а. 462,090 b. 461,390 700,302 X с. d. 1,385,102 X

Issue Price The following terms relate to independent bond issues: a. 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments c. 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments d. 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Use the appropriate present value table: PV of $1 and PV of Annuity of $1 Required: Assuming the market rate of interest is 10%, calculate the selling price for each bond issue. If required, round all calculations to the nearest dollar. Situation Selling Price of the Bond Issue а. 462,090 b. 461,390 700,302 X с. d. 1,385,102 X

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
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Issue Price The following terms relate to independent bond issues: a. 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments c. 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments d. 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Use the appropriate present value table: PV of $1 and PV of Annuity of $1 Required: Assuming the market rate of interest is 10%, calculate the selling price for each bond issue. If required, round all calculations to the nearest dollar. Situation Selling Price of the Bond Issue 462,090 V а. b. 461,390 V 700,302 X с. d. $ 1,385,102 X
Transcribed Image Text:Issue Price The following terms relate to independent bond issues: a. 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments c. 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments d. 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Use the appropriate present value table: PV of $1 and PV of Annuity of $1 Required: Assuming the market rate of interest is 10%, calculate the selling price for each bond issue. If required, round all calculations to the nearest dollar. Situation Selling Price of the Bond Issue 462,090 V а. b. 461,390 V 700,302 X с. d. $ 1,385,102 X
Rivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will pay 10% interest each December 31. The current market rate is 10%; therefore, the bonds will be issued at face value. Required: 1. For each of the following situations, indicate whether you believe the company will receive a premium on the bonds or will issue them at a discount or at face value. a. Interest is paid semiannually instead of annually. Face value b. Assume interest is paid annually but that the market rate of interest is 8%; the nominal rate is still 10%. Premium 2. For each situation in part (1), prove your statement by determining the issue price of the bonds given the changes in (a) and (b). If required, round all calculations to the nearest dollar. Here are some time value of money factors: Present value of an annuity, n=10, i=8%, PV=6.71008 Present value of an annuity, n=20, i=5%, PV=12.46221 Present value of a single amount, n=10, i=8%, PV=0.46319 Present value of a single amount, n=20, i=5%, PV=0.37689 Proof: Bond Price а. $4 500,000 b. 500,000| Х
Transcribed Image Text:Rivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will pay 10% interest each December 31. The current market rate is 10%; therefore, the bonds will be issued at face value. Required: 1. For each of the following situations, indicate whether you believe the company will receive a premium on the bonds or will issue them at a discount or at face value. a. Interest is paid semiannually instead of annually. Face value b. Assume interest is paid annually but that the market rate of interest is 8%; the nominal rate is still 10%. Premium 2. For each situation in part (1), prove your statement by determining the issue price of the bonds given the changes in (a) and (b). If required, round all calculations to the nearest dollar. Here are some time value of money factors: Present value of an annuity, n=10, i=8%, PV=6.71008 Present value of an annuity, n=20, i=5%, PV=12.46221 Present value of a single amount, n=10, i=8%, PV=0.46319 Present value of a single amount, n=20, i=5%, PV=0.37689 Proof: Bond Price а. $4 500,000 b. 500,000| Х
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