1.

a)

b)

Midland Oil has $1,000 par value bonds outstanding at 16 percent interest. The bonds will mature in 25 years. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Compute the current price of the bonds if the present yield to maturity is: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.) Bond Price a. b. 15 percent 14 percent 16 percent c. Exodus Limousine Company has $1,000 par value bonds outstanding at 19 percent interest. The bonds will mature in 50 years. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Compute the current price of the bonds if the percent yield to maturity is: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.) Bond Price a. 5 percent b. 9 percent Appendix B Present value of $1, PVC PV = FV v=f410 + o Period 3% 4% 1 2 3 4 5 6 7 8 10 11 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.672 0.608 12 13 14 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.372 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.478 0.412 0.307 0.228 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.375 0.308 0.208 0.141 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 0.458 0.436 0.416 0.396 0.377 0.295 0.231 0.142 0.087 Percent 6% 7% 0.943 0.935 0.890 0.873 0.840 0.816 0.792 0.763 0.747 0.713 0.705 0.666 0.665 0.623 0.627 0.582 0.592 0.544 0.558 0.508 0.527 0.475 0.497 0.444 0.469 0.415 0.442 0.388 0.417 0.362 0.394 0.339 0.371 0.317 0.350 0.296 0.331 0.277 0.312 0.258 0.233 0.184 0.174 0.131 0.097 0.067 0.054 0.034 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 0.146 0.099 0.046 0.021 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 0.116 0.075 0.032 0.013 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.092 0.057 0.022 0.009 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 0.074 0.044 0.015 0.005 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.059 0.033 0.011 0.003 15 16 17 18 19 20 25 30 40 50 Appendix B (concluded) Present value of $1 Period 13% 15% 25 50% 1 2 3 4 0.667 0.444 0.296 0.198 0.132 5 6 8 9 10 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 . 204 0.181 0.160 . 141 0.125 0.111 0.098 0.087 0.047 0.026 0.008 0.002 148 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0,182 0.160 0.140 0.123 . 108 0.095 0.083 0.073 0.038 0,020 0,005 0.001 11 0.870 0.756 0.658 0.572 0,497 0,432 0.376 0.327 0.284 0.247 0,215 0,187 0.163 0.141 0.123 0.107 0.093 0,081 0.070 0.061 0.030 0,015 0.004 0.001 16 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.168 0.145 0.125 0.108 0.093 0.000 0.069 . 0.051 0.024 0.012 0.003 0.001 12 13 14 15 16 17 18 19 20 25 30 178 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0 208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043 0.020 0.009 0.002 0 Percent 19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.074 0.062 0.052 0.044 0.037 0.031 0.013 0.005 0.001 0 18 0.847 0.718 0.609 0.515 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037 0.016 0.007 0.00 1 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 . 194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 0.010 0.004 0.001 0 30% 0.769 0.592 0.455 0.30 0.269 0.207 0.159 0.123 0.094 0.073 0.056 0.043 0.033 0.025 0.020 0.015 0.012 0.009 0.007 0.005 0.001 35% 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.050 0.037 0.027 0.020 0.015 0.011 .008 .006 .005 . 0.002 0.001 0.800 0.640 0.512 0.4 10 0.328 0.262 0,210 0.168 0.134 0.107 0.086 0.069 0.055 0.044 .035 0.028 0.023 .018 0.014 0.012 0.004 0.001 40K 0714 0.510 0.364 0.260 0.186 0.133 0.095 0.068 0.048 0.035 0025 0.018 0.013 0.009 0.006 0.005 0.003 0.002 0.002 0.001 0.088 0.059 0.039 0.026 0.017 0.012 0.008 0.005 0.003 0.002 0.002 0.001 0.001 40 50 Appendix D Present value of an annuity of $1, PV FA PVA = A 1- 1 (1 + i)" Period 1% 3% 4% 9% 12% 8% 0.926 1. 2 0.990 1.970 2.941 0.893 2% 0.980 1.942 2.884 5% 0.952 1.859 0.971 1.913 2.829 11% 0.901 1.713 10% 0.909 1.736 2.487 3.170 1.783 1.690 2.402 3 2.723 2.577 2.444 3.102 4 3.902 3.808 3.717 3.546 3.037 3.312 3.993 5 3.696 3.605 4.853 5.795 3.791 4.355 6 4.231 4.111 4.564 7 6.728 4.712 8 9 5.146 5.537 5.889 10 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 11 7.652 8.566 9.471 10.368 11.255 12.134 13.004 13.865 14.718 15.562 6.207 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590 15.622 17.292 12 Percent 6% 7% 0.943 0.935 1.833 1.808 2.673 2.624 3.465 3.387 4.212 4.100 4.917 4.767 5.582 5.389 6.210 5.971 6.802 6.515 7.360 7.024 7.887 7.499 8.384 7.943 8.853 8.358 9.295 8.745 9.712 9.108 10.106 9.447 10.477 9.763 10.828 10.059 11.158 10.336 11.470 10.594 12.783 11.654 13.765 12.409 15.046 13.332 15.762 13.801 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 12.849 13.578 14.292 14.992 15.678 16.351 19.523 22.396 27.355 31.424 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.877 17.413 19.600 23.115 25.730 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 13 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 9.129 9.823 10.274 10.757 10.962 6.492 6.750 6.982 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 14.094 15.372 17.159 18.256 14 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 15 7.191 16 7.824 17 18 8.244 8.559 8.851 9.122 9.372 9.604 9.818 10.675 11.258 11.925 12.233 7.379 7.549 7.702 7.839 7.963 19 20 25 16.398 17.226 18.046 22.023 25.808 32.835 39.196 8.022 8.201 8.365 8.514 9.077 9.427 9.779 9.915 30 8.422 8.694 8.951 7.843 8.055 8.244 8.304 40 19.793 11 50 21.482 9.042 Appendix D (concluded) Present value of an annuity of $1 Percent 19% Period 14% 16% 18% 25% 35% 40% 50% 1 2 13% 0.885 1.668 2.361 2.974 3.517 3.998 15% 0.870 1.626 2.283 2.855 0.862 1.605 2.246 2.798 0.840 1.547 2.140 0.714 1.224 1.589 1.849 3 20% 0.833 1.528 2.106 2.589 2.991 3.326 0.667 1.111 1.407 1.605 4 2.639 5 3.274 1.737 17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 4.836 3.352 3.784 2.035 2.168 6 3.685 7 3.605 8 3.837 4.423 4.799 5.132 5.426 9 10 11 5.687 5.918 6.122 12 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 6.550 6.623 6.873 7.003 7.105 7.133 4.031 4.192 4.327 4.439 4.533 1.824 1.883 1.922 1.948 1.965 1.977 1.985 1.990 4.988 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353 5.467 5.517 5.548 5.554 0.800 1.440 1.952 2.362 2.689 2.951 3.161 3.329 3.463 3.571 3.656 3.725 3.780 3.824 3.859 3.887 3.910 3.928 3.942 3.954 3.985 3.995 3.999 4.000 30% 0.769 1.361 1.816 2.166 2.436 2.643 2.802 2.925 3.019 3.092 3.147 3.190 3.223 3.249 3.268 3.283 3.295 3.304 3.311 3.316 3.329 3.332 3.333 3.333 13 0.741 1.289 1.696 1.997 2.220 2.385 2.508 2.598 2.665 2.715 2.752 2.779 2.799 2.814 2.825 2.834 2.840 2.844 2.848 2.850 2.856 2.857 2.857 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 6.464 6.566 6.642 6.661 14 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.668 5.749 5.818 5.877 5.929 6.097 6.177 6.233 6.246 3.058 3.410 3.706 3.954 4.163 4.339 4.486 4.611 4.715 4.802 4.876 4.938 4.988 5.033 5.070 5. 101 5.195 5.235 5.258 5.262 6.302 6.462 6.604 6.729 15 . 2.263 2.331 2.379 2.414 2.438 2.456 2.469 2.478 2.484 2.489 2.492 2.494 2.496 2.497 2.499 16 17 5.118 5.229 5.324 5.405 5.475 5.534 5.584 5.628 5.766 5.829 5.871 5.880 18 1.993 1.995 1.997 1.998 1.999 1.999 4.611 4.675 4.730 4.775 4.812 4.843 4.870 4.948 4.979 4.997 4.999 19 6.840 6.938 7.025 7.330 7.496 7.634 7.675 20 25 30 1.999 2.000 2.000 40 2.500 2.500 2.500 2.000 2.000 50 2.857