The face value is $82,000, the stated rate is 10%, and the term of the bond is eight years
The bond pays interest semiannually. At the time of issue, the market rate is 8%. What is the present value of the bond at the market rate?
Present value of $1:
4% 5% 6% 7% 8%
15 0.555 0.481 0.417 0.362 0.315
16 0.534 0.458 0.394 0.339 0.292
17 0.513 0.436 0.371 0.317 0.270
18 0.494 0.416 0.350 0.296 0.250
19 0.475 0.396 0.331 0.277 0.232
Present value of annuity of $1:
4% 5% 6% 7% 8%
15 11.118 10.380 9.712 9.108 8.559
16 11.652 10.838 10.106 9.447 8.851
17 12.166 11.274 10.477 9.763 9.122
18 12.659 11.690 10.828 10.059 9.372
19 13.134 12.085 11.158 10.336 9.604
A) $91,561
B) $47,773
C) $43,673
D) $84,788
A .Present value factor 0.534
Future value 82,000
Present value ($82,000 x 0.534 ) $43,788
Interest $4,100
Annuity PV factor 11.652
Present value of interest payments ($4,100 x 11.652 ) $47,773
_______
Total present value $91,561
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