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| Topic: |
Business
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| Number of pages / Number of words: |
6 / 1586 |
Essay's paper body
Bond Value
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The
bonds will mature in 25 years. Compute the current price of the bonds if the
present yield to maturity is:
a. 7 percent.
b. 10 percent.
c. 13 percent
Answer:
To calculate the price of the bond we need to calculate / read from tables the values of
PVIF= Present Value Interest Factor
PVIFA= Present Value Interest Factor for an Annuity
Price of bond= PVIF * Redemption value + PVIFA * interest payment per period
PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%
PVIF( n, r%)= =1/(1+r%)^n
a...
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Bond Value
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The
bonds will mature in 25 years. Compute the current price of the bonds if the
present yield to maturity is:
a. 7 percent.
b. 10 percent.
c. 13 percent
Answer:
To calculate the price of the bond we need to calculate / read from tables the values of
PVIF= Present Value Interest Factor
PVIFA= Present Value Interest Factor for an Annuity
Price of bond= PVIF * Redemption value + PVIFA * interest payment per period
PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%
PVIF( n, r%)= =1/(1+r%)^n
a...
Essay fragment
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