Question

1.Without referring to the preprogrammed function on your financial calculator, use the basic formula for present value, along with the given opportunity cost, r, and the number of periods, n, to calculate the present value of $1 in each of the cases shown in the following table. Case Opportunity cost, r Number of periods, n A 2% B 10 C D 13 2 2.Bond value and changing required returns Midland Utilities has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon interest rate of 11% and pays interest annually. a.Find the value of the bond if the required return is (1) 11%, (2) 15%, and (3) 8%. b. Plot your findings in part a on a set of "required return (x axis)-market value of bond (y axis)" axes. 4 23

Answer 1

nok1 xlsy Micro (? File Home Insert Page Layout Formulas Data Review View Cut - AutoSum Wrap Text Calibri 11 General Fill Copy A Merge & Center Conditional Format Insert Delete Format Paste Cell Sort & Find & BIU % 2 Clear Format Painter ble Styles er Select Formatting Clipboard Font Alignment Number Shules Cells Editing 118 E G H M N C Q. U A PRESENT VALUE 1 +R)AN 1/ ( 1+R)AN 823845 1 082433 case 2% 2. 4 102% 10% 110 % 1.21 0.826446 4. 2 5 C 105% 1.157625 0.863838 value of bond 139% 1.2769 0.783147 6 113% 7 1400 PV 1/(1+R)AN 8 1200 maturity coupon annual 1000 10 2 par value period interest rate 800 1000 12 years 11 119 110 value of bond PV of 600 bond required interest bond value of coupon 400 12. return PVAF interest annuity value DV 1000 bond 200 interest 13 rates 6.492 1000 1000.12 14.12 0.286 11% 15% 8% 15 7,536 110 828.96 1000 0.397 397 1225.96 16 17 18 19 20. 21 Sheet7Sheet8Sheet9Sheet10 Sheet11 4 HSheet1 Sheet2Sheet3Sheet4 Sheet5Sheet6 100% Ready ENG 2:44 PM INTL 6/18/2019