Price Enterprises invested in the bonds of Greater Glouster on January 1, 2015. These 10-year, $100,000 bonds pay interest of 3% every June 30 and December 31. The effective rate of interest for similar bonds on January 1 was 4%. What is the purchase price of these bonds?
A) $100,000
B) $91,889
C) $108,584
D) $91,824
Answer: D
Explanation: D) Present Value of the Bond calculated using the Present Value function in Excel with the following inputs:
N = 20 (10 years × 2 payment per year)
I/Y = 2% (4% market rate / 2 payments per year)
PMT = $1,500 ($100,000 × .03 × 6/12)
FV = $100,000
Excel Formula - =PV(.02,20,1500,100000)
You might also like to view...
A nonprofit organization's CEO has been arrested for embezzlement. In handing the media, the PR person should
a. say "no comment" b. convey that there is nothing to worry about c. release information pointing to someone else being at fault d. get the facts and release the information quickly e. say that the nonprofit will be hiring a new CEO
Identify Hackman and Oldham's five desirable characteristics of job design
What will be an ideal response?