The following terms relate to independent bond issues: a. 610 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 610 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. 1,880 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 each bond issue. If required, round your intermediate calculations and final answers to the nearest dollar. Situation Selling Price of the Bond Issue а. 563,752 b. 562,897 C. d.
The following terms relate to independent bond issues: a. 610 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments b. 610 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. 1,880 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 each bond issue. If required, round your intermediate calculations and final answers to the nearest dollar. Situation Selling Price of the Bond Issue а. 563,752 b. 562,897 C. d.
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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- [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 your intermediate calculations and final answers to the nearest dollar.
| Situation | Selling Price of the Bond Issue |
|-----------|--------------------------------|
| **a.** | $563,752 |
| **b.** | $562,897 |
| **c.** | |
| **d.** | |](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc00f41a8-3019-411c-9841-b4d3b90602dd%2Ff22f12ad-a39a-4a19-b36a-6dd8b1419f49%2Ffpc1txs_processed.png&w=3840&q=75)
Transcribed Image Text:### Issue Price
The following terms relate to independent bond issues:
- **a.** 610 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments
- **b.** 610 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.** 1,880 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments
Use the appropriate present value table:
- [PV of $1](#)
- [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 your intermediate calculations and final answers to the nearest dollar.
| Situation | Selling Price of the Bond Issue |
|-----------|--------------------------------|
| **a.** | $563,752 |
| **b.** | $562,897 |
| **c.** | |
| **d.** | |
- [PV of Annuity of $1](#)
#### Required:
For each market interest rate, answer the following questions. Round calculations and answers to the nearest whole dollar. Due to differences in rounding when using the present value factors, you need to round your answer for the ISSUE PRICE in the first column only to the nearest 100.
#### Market Rate Table:
| | 10% | 8% | 12% |
|---|-----|----|------|
| **1. What is the amount due at maturity?** | $400,000 | $400,000 | $400,000 |
| **2. How much cash interest will be paid every six months?** | $20,000 | $20,000 | $20,000 |
| **3. At what price will the bond be issued?** | $ | $ | $ |
1. **What is the amount due at maturity?**
- For all market rates, the face value of $400,000 will be due at maturity.
2. **How much cash interest will be paid every six months?**
- For all market rates, the semiannual cash interest payment will be $20,000 (calculated as $400,000 * 10% / 2).
3. **At what price will the bond be issued?**
- This requires calculating the present value of the bond's cash flows (interest and principal) at each market rate.
Please refer to the provided present value of $1 and present value of annuity of $1 tables to compute the respective amounts. To find the issue price, you need to sum the present value of the interest payments and the present value of the maturity amount, discounted at the respective market rates.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc00f41a8-3019-411c-9841-b4d3b90602dd%2Ff22f12ad-a39a-4a19-b36a-6dd8b1419f49%2Fae7rkq_processed.png&w=3840&q=75)
Transcribed Image Text:### Issue Price
Whitworth International plans to issue $400,000 face value bonds with a stated interest rate of 10%. They will mature in 5 years. Interest will be paid semiannually. At the date of issuance, assume that the market rate is (a) 10%, (b) 8%, and (c) 12%.
#### Use the appropriate present value table:
- [PV of $1](#)
- [PV of Annuity of $1](#)
#### Required:
For each market interest rate, answer the following questions. Round calculations and answers to the nearest whole dollar. Due to differences in rounding when using the present value factors, you need to round your answer for the ISSUE PRICE in the first column only to the nearest 100.
#### Market Rate Table:
| | 10% | 8% | 12% |
|---|-----|----|------|
| **1. What is the amount due at maturity?** | $400,000 | $400,000 | $400,000 |
| **2. How much cash interest will be paid every six months?** | $20,000 | $20,000 | $20,000 |
| **3. At what price will the bond be issued?** | $ | $ | $ |
1. **What is the amount due at maturity?**
- For all market rates, the face value of $400,000 will be due at maturity.
2. **How much cash interest will be paid every six months?**
- For all market rates, the semiannual cash interest payment will be $20,000 (calculated as $400,000 * 10% / 2).
3. **At what price will the bond be issued?**
- This requires calculating the present value of the bond's cash flows (interest and principal) at each market rate.
Please refer to the provided present value of $1 and present value of annuity of $1 tables to compute the respective amounts. To find the issue price, you need to sum the present value of the interest payments and the present value of the maturity amount, discounted at the respective market rates.
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