Question

18. Sand Explorers issues bonds due in 10 years with a stated interest rate of 8% and a face value of $190,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. Using present value tables, calculate the issue price of the bonds (EV of S1, PV of S1, EVA of 51. PVA of SI EVAD. 51 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $149,966 $234.429 $190,000 $203.502. 19. Mountain Excursions issues bonds due in 15 years with a stated interest rate of 11% and a face value of $180,000. Interest payments are made semi-annually. The market rate for this type of bond is 12%. Using a financial calculator or Ercel, calculate the issue price of the bonds. Multiple Choice $167,612 5193,835 $100,313 $180,000 20. Kelly Industries issued 10% bonds, dated January 1, with a face value of $150.000 on January 1, 2021. The bonds mature in 2031 (10 years). Interest is paid semiannually on June 30 and December 31. For bonds of similar risk and maturity the market yield is 12%. What was the issue price of the bonds? EV of S1PV of S1 EVA of $1. PVA of 51. EVAD of 51 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $86,024. $103,915. $143.855. $132.794

Answer 1

	A	B
1	18
2	Face value	190000
3	Stated interest rate	8%
4	Semiannual interest paid	7600
5	Number of semiannual periods to maturity	20
6	Semiannual market rate	0.035
7
8	Present value of interest paid	$108,014
9	Present value of face value to be paid at maturity	$95,488
10	Issue price of the bonds	$203,502
11
12	Therefore, the correct answer is $203,502.
13
14	19
15	Face value	180000
16	Stated interest rate	11%
17	Semiannual interest paid	9900
18	Number of semiannual periods to maturity	30
19	Semiannual market rate	0.06
20
21	Present value of interest paid	$136,272
22	Present value of face value to be paid at maturity	$31,340
23	Issue price of the bonds	$167,612
24
25	Therefore, the correct answer is $167,612.
26
27	20
28	Face value	150000
29	Stated interest rate	10%
30	Semiannual interest paid	7500
31	Number of semiannual periods to maturity	20
32	Semiannual market rate	0.06
33
34	Present value of interest paid	$86,024
35	Present value of face value to be paid at maturity	$46,771
36	Issue price of the bonds	$132,795
37
38	The answer is closest to $132,794.
39	Therefore, the correct answer is $132,794.

Above figures have been calculated in Excel in the following manner:

18
Face value	190000
Stated interest rate	0.08
Semiannual interest paid	=B2*B3*(1/2)
Number of semiannual periods to maturity	=10*2
Semiannual market rate	=7%/2
Present value of interest paid	=PV(B6,B5,-B4,0,0)
Present value of face value to be paid at maturity	=PV(B6,B5,0,-B2,0)
Issue price of the bonds	=B8+B9
Therefore, the correct answer is $203,502.
19
Face value	180000
Stated interest rate	0.11
Semiannual interest paid	=B15*B16*(1/2)
Number of semiannual periods to maturity	=15*2
Semiannual market rate	=12%/2
Present value of interest paid	=PV(B19,B18,-B17,0,0)
Present value of face value to be paid at maturity	=PV(B19,B18,0,-B15,0)
Issue price of the bonds	=B21+B22
Therefore, the correct answer is $167,612.
20
Face value	150000
Stated interest rate	0.1
Semiannual interest paid	=B28*B29*(1/2)
Number of semiannual periods to maturity	=10*2
Semiannual market rate	=12%/2
Present value of interest paid	=PV(B32,B31,-B30,0,0)
Present value of face value to be paid at maturity	=PV(B32,B31,0,-B28,0)
Issue price of the bonds	=B34+B35
The answer is closest to $132,794.
Therefore, the correct answer is $132,794.