Complete the below table to calculate the price of a $1.4 million bond issue under each of the following independent assumptions (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Enter your answers in whole dollars.):

1. Maturity 15 years, interest paid annually, stated rate 10%, effective (market) rate 12%

2. Maturity 15 years, interest paid semiannually, stated rate 10%, effective (market) rate 12%

3. Maturity 5 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%

4. Maturity 10 years, interest paid semiannually, stated rate 12%, effective (market) rate 10%

5. Maturity 10 years, interest paid semiannually, stated rate 12%, effective (market) rate 12%

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abdulmajeedabiodunac abdulmajeedabiodunac · Answer 1 · 2020-04-23T09:30:32+02:00

Answer:

The prices as required as follows:

$1,209,295.79

$1,207,292.36

$1,508,104.29

$1,574,470.94

$1,400,000.00

Explanation:

The price of a bond can be computed using the pv function in excel which is given as ;=-pv(rate,nper,pmt,fv)

rate is the annual or semi annual effective rate

nper is the number of coupon interest the bond would pay

pmt is the annual or semi-annual coupon payment

fv is the face value of the bond at $1,400,000

1

=-pv(12%,15,1400000*10%,1400000)

pv=$1,209,295.79

2

=-pv(12%*6/12,15*2,1400000*10%*6/12,1400000)

pv=$1,207,292.36

3

=-pv(10%*6/12,5*2,1400000*12%*6/12,1400000)

pv=$1,508,104.29

4

=-pv(10%*6/12,10*2,1400000*12%*6/12,1400000)

pv=$1,574,470.94

5

=-pv(12%*6/12,10*2,1400000*12%*6/12,1400000)

pv=$1,400,000