A $1,000 par value bond was issued five years ago at a 8 percent coupon rate. It currently has 20 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.) Current bond price b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.) Percentage % c. Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.) Percentage % d. Why is the percentage gain larger than the percentage loss when the same dollar amounts are involved in parts b and c? The percentage gain is larger than the percentage loss because the investment is larger. The percentage gain is larger than the percentage loss because the investment is smaller. Appendix B Present value of $1, PV 1 PV = FV (1+ Percent Perlod 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.957 0.942 0.826 0.812 0.797 3 0.971 0.942 0.915 0.885 0.864 0 840 0.816 0.794 0.772 0.751 0.731 0.712 4 0.96 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.70B 0.6B3 0.659 0.636 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 6 0.942 0 888 0.832 0790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 9 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.3BE 0.352 0.322 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 12 0887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.36B 0.326 0.290 0.258 0.229 14 0.370 0.758 0.661 0.577 0.505 0.442 0.3B8 0.340 0.299 0.263 0.232 0.205 15 O 861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0239 0.209 0.183 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 19 0.B28 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.139 0.116 20 0.B20 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.17B 0.149 0.124 0.104 25 0 780 0.610 0.478 0.375 0295 0233 0.184 0.146 0.116 0.092 0074 0.059 30 0.552 0.412 0.305 0.231 0.174 0.131 0.099 0.075 0.044 0.03 0.742 0.672 0.057 0.022 40 0.453 0.307 0.200 0.142 0.097 0.067 0.046 0.032 0.015 0.011 50 0.608 0.372 0.228 0.141 0.0B7 0.054 0.034 0.021 0.013 0.009 0.005 0.003 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.285 0.877 0.870 0.862 0.855 0.947 0.840 0.B33 0.800 0.769 0.741 0.714 0.667 2 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.640 0.592 0.549 0.510 0.444 3 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.512 0.455 0.406 0.364 0.29 a 0.613 0.592 0.572 0.552 0.534 0.515 0.499 0.482 0.410 0.350 0.301 0.260 0.198 5 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.32B 0.269 0.223 0.186 0.132 6 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.262 0.207 0.165 0.133 0.088 7 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.210 0.159 0.122 0.095 0.059 ... 8 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.168 0.123 0.091 0.068 0.039 9 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.134 0.094 0.067 0.048 0.026 10 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.107 0.073 0.050 0.035 0.017 11 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.086 0.056 0.037 0.025 0.012 12 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.069 0.043 0.027 0.018 0.008 13 0.204 0.162 0.163 0.145 0.130 0.116 0.104 0.093 0.055 0.033 0.020 0.013 0.005 14 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.044 0.025 0.015 0.009 0.002 15 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.035 0.020 0.011 0.006 0.002 16 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.028 0.015 0.008 0.005 0.002 17 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.023 0.012 0.006 0.003 0.001 19 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.018 0.009 0.005 0.002 0.001 19 0.09B 0.083 0.070 0.050 0.051 0.043 0.037 0.031 0.014 0.007 0.003 0.002 0 20 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.012 0.005 0.002 0.001 0 25 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.004 0.001 0.001 o 0 30 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.001 0 0 O 0 40 0.00B 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0 0 0 0 0 50 ......... 0.002 0.001 0.001 0.001 0 0 0 0 0 0 0 O 0 1 Appendix D Present value of an annuity of $1, PVA PVA A 111 1- Percent Period 1% 2% 3% 4% 5% 5 6% 7% 8% 9% 10% 11% 12% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0917 0.909 0.901 0.893 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 RRRRR 4 3.902 3.808 3.717 3.630 3.546 3.465 3.397 3.312 3.240 3.170 3.102 3037 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 11 10.368 9.787 9.253 8.760 8.306 7.987 7.499 7.139 6.805 6.495 6.207 5.938 12 11.255 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 13 12.134 10.575 11.348 12.106 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 14 13.004 11.296 10.563 9.899 9.295 3.745 8.244 7.786 7.367 6.982 6.628 13.865 12 849 11.938 11.118 10.380 9.712 9.108 8.559 8.051 7.606 7.191 6.811 15 ... 16 ......... 14.718 13.578 12.561 11.652 10.B3B 10.105 9.447 8.851 8.313 7.824 7.379 6.974 17 15.562 14292 13.166 12.166 11 274 10,477 9.763 9.122 8.544 8,022 7.549 7.120 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 B.201 7.702 7.250 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 B.365 7.839 7.366 ***** 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 25 22.023 19.523 17.413 15.622 12.783 11.654 10.675 9.823 9.077 8.422 7.843 14.094 15.372 30 25.808 22.396 19.600 17.292 13.765 12.409 11.258 10.274 9.427 8.694 8.055 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 10.952 9.915 9.042 8.304 eeeeeeeeeeeeeee Appendbc D (conduded) Present value of an annuity of $1 Percent Period 13% 14% % 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.800 0.769 0.741 0.714 0.667 2 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.440 1.361 1.289 1.224 1.111 3 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 1.952 1.816 1.696 1.589 1.407 4 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.362 2.166 1.997 1.849 1.605 5 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.689 2.436 2.220 2.035 1.737 6 3.998 3.839 3.784 3.685 3.599 3.490 3.410 3.326 2.951 2.643 2.385 2.16B 1.824 7 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.161 2.802 2.500 2.263 1.883 8 4.799 4.639 4.487 4.344 4.207 4078 3954 3.837 3.329 2.925 2.598 2.331 1.922 9 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4,031 3.463 3.019 2.665 2.379 1.948 10. 5.426 5.216 5019 4,833 4.659 4.494 4339 4.192 3.571 3.092 2.715 2.414 1.965 11 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 3.656 3.147 2.752 2.43B 1.977 12 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 3.725 3.190 2.779 2.456 1.985 13 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 3.780 3.223 2.799 2.469 1.990 14 6.302 6.002 5.724 5.46B 5.229 5.00B 4.802 4.611 3.824 3.249 2.814 2.478 1.993 15 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 3.859 3.268 2.825 2.484 1.995 16 6.604 6.265 5.954 5.66B 5.405 5.162 4.938 4.730 3.887 3.283 2.834 2.489 1.997 17 6.729 6.373 6.047 5.749 5.475 5.222 4.988 4.775 3.910 3.295 2.340 2.492 1.998 18 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 3.928 3.304 2.844 2.494 1.999 19 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 3.942 3.311 2.848 2.496 1.999 1.999 20 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 3.954 3.316 2.B50 2.497 25 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 3.985 3.329 2.856 2.499 2.000 30 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 3.995 3.332 2.857 2.500 2.000 40 7.634 7.105 6.642 6.233 5.871 5.543 5.258 4.997 3.999 3.333 2.357 2.500 2.000 50 7.675 7.133 6.661 6.246 5.880 5.554 5.262 4.999 4.000 3.333 2857 2.500 2.000