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The Kiwi Shop Company has two bond issues outstanding. Both bonds pay $100 annual interest plus...

The Kiwi Shop Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.

 

What will be the value of each of these bonds when the going rate of interest is 6%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L$  Bond S$  


What will be the value of each of these bonds when the going rate of interest is 10%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L$  Bond S$  


What will be the value of each of these bonds when the going rate of interest is 14%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
Bond L$  Bond S$


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Answer #1

1. What will be the value of each of these bonds when the going rate of interest is 6%?  

Bond L= 1388.49

Bond S = 1037.74

2. What will be the value of each of these bonds when the going rate of interest is 10%?

Bond L = 1000

Bond S= 1000

3. What will be the value of each of these bonds when the going rate of interest is 14%?

Bond L= 754.31

Bond S= 964.91

Workings:

1.

NPER 15.00
FV 1000
PMT 100.0
Rate 6.00%
PV $1,388.49 [-pv(rate,nper,pmt,fv,1)
NPER 1.00
FV 1000
PMT 100.0
Rate 6.00%
PV $1,037.74 [-pv(rate,nper,pmt,fv,1)

2.

NPER 15.00
FV 1000
PMT 100.0
Rate 10.00%
PV $1,000.00 [-pv(rate,nper,pmt,fv,1)
NPER 1.00
FV 1000
PMT 100.0
Rate 10.00%
PV $1,000.00 [-pv(rate,nper,pmt,fv,1)

3.

NPER 1.00
FV 1000
PMT 100.0
Rate 14.00%
PV $964.91 [-pv(rate,nper,pmt,fv,1)
NPER 15.00
FV 1000
PMT 100.0
Rate 14.00%
PV $754.31 [-pv(rate,nper,pmt,fv,1)
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