Question

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Exercise 14-2 (Algo) Determine the price of bonds in various situations (LO14-2] 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.): 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 pald semiannually, stated rate 12%, effective (market) rate 10%. 4. Maturity 10 years, Interest pald semiannually, stated rate 12%, 5. Maturity 10 years, Interest pald semiannually, stated rate 12%, effective (market) rate 12%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Maturity 15 years, interest paid annually, stated rate 10%, effective market) rate 12%. (Round your answers to the nearest whole dollar.) Table values are based on: Amount Present Value Cash Flow Interest Principal Price of bonds < Required 1 Required 2 >

Answer 1

Answer is given below with working. please note answer might slightly vary due to decimals of present value factor

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Cash Flow Interest Principal Price of Bonds 12% Amount $140,000 $1,400,000 Present value $953,520 $255,780 $1,209,300 PV factor 6.81086 0.1827 Working note: Annual interest at 10% $140,000 Bond face value $1,400,000 6% Cash Flow Interest Principal Price of Bonds Amount Present value $70,000 $963,538 $1,400,000 $243,754 $1,207,292 PV factor 13.76483 0.17411 Working note: Annual interest at 10% semi-Annual interest Bond face value $1,400,000 $140,000 $70,000 Cash Flow Interest Principal Price of Bonds Amount $84,000 $1,400,000 Present value $648,625 $859,474 $1,508,099 PV factor 7.72173 0.61391 Working note: Annual interest at 12% semi-Annual interest Bond face value $1,400,000 $168,000 $84,000 20 Cash Flow Interest Principal Price of Bonds 5% Amount Present value $84,000 $1,046,826 $1,400,000 $527,645 $1,574,470 PV factor 12.46221 0.376889 Working note: Annual interest at 12% Semi-Annual interest Bond face value $1,400,000 $168,000 $84,000 Cash Flow Interest Principal Price of Bonds 6% Amount $84,000 $1,400,000 Present value $963,473 $436,527 $1,400,000 PV factor 11.46992 0.311805 Working note: Annual interest at 12% Semi-Annual interest Bond face value $1,400,000 $168,000 $84,000