Question

1. What is the issue price of a $825,000, 15-year bond, with a stated rate of 5% when the market rate is 7%?

2. What is the issue price of a $1,325,000, 5-year bond, with a stated rate of 7% when the market rate is 9%?

3. What is the issue price of a $525,000, 15-year bond, with a stated rate of 4% when the market rate is 5%?

4. What is the issue price of a $325,000, 15-year bond, with a stated rate of 10% when the market rate is 9%?

Answer 1

1. What is the issue price of a $825,000, 15-year bond, with a stated rate of 5% when the market rate is 7%?
Computation Of Bond Price
a	Annual Interest Amount	$                41,250.00
	($825000*5%)
b	PV Annuity Factor for (15 Years,7%)	9.10791
c	Present Value Of Annual Interest (a*b)	$            3,75,701.45
d	Redemption Value	$            8,25,000.00
e	PV Factor Of (15 Years,7%)	0.36245
g	Present Value Of Redemption Amount (d*e)	$            2,99,017.97
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$            6,74,719.42
2. What is the issue price of a $1,325,000, 5-year bond, with a stated rate of 7% when the market rate is 9%?
Computation Of Bond Price
a	Annual Interest Amount	$                92,750.00
	($1325000*7%)
b	PV Annuity Factor for (5 Years,9%)	3.88965
c	Present Value Of Annual Interest (a*b)	$            3,60,765.15
d	Redemption Value	$          13,25,000.00
e	PV Factor Of (5 Years,9%)	0.64993
g	Present Value Of Redemption Amount (d*e)	$            8,61,159.09
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$          12,21,924.24
3. What is the issue price of a $525,000, 15-year bond, with a stated rate of 4% when the market rate is 5%?
Computation Of Bond Price
a	Annual Interest Amount	$                21,000.00
	($525000*4%)
b	PV Annuity Factor for (15 Years,5%)	10.37966
c	Present Value Of Annual Interest (a*b)	$            2,17,972.82
d	Redemption Value	$            5,25,000.00
e	PV Factor Of (15 Years,5%)	0.48102
g	Present Value Of Redemption Amount (d*e)	$            2,52,533.98
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$            4,70,506.80
4. What is the issue price of a $325,000, 15-year bond, with a stated rate of 10% when the market rate is 9%?
Computation Of Bond Price
a	Annual Interest Amount	$                32,500.00
	($325000*10%)
b	PV Annuity Factor for (15 Years,9%)	8.06069
c	Present Value Of Annual Interest (a*b)	$            2,61,972.37
d	Redemption Value	$            3,25,000.00
e	PV Factor Of (15 Years,9%)	0.27454
g	Present Value Of Redemption Amount (d*e)	$                89,224.86
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$            3,51,197.24