Question
8) Cheyenne Inc. is planning to issue bonds that will pay 9% semiannual interest and mature in 9 years. a. How much will investors be
8) Cheyenne Inc. is planning to issue bonds that will pay 9% semiannual interest and mature in 9 years.
a. How much will investors be willing to pay for a $1,000 bond if the prevailing market yield rate is 8%?
b. How much will investors be willing to pay for a $1,000 bond if the prevailing market interest rate is 10%?
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
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