A $1,000 par value bond was issued five years ago at a 6 percent coupon rate. It currently has 8 years remaining to maturity. Interest rates on similar debt obligations are now 8 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 loss % 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 gain % 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, PVF PV=F4 [1047 FV (+ i Percent Period 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 0.943 0.890 0.873 0.857 0.842 0.826 0.812 3 0.961 0.942 0.924 0.907 0.864 0.971 0.925 0.889 0.855 0.816 0.915 0.888 0.751 0.840 0.792 0.794 0.735 0.772 0.708 0.731 0.659 0.797 0.712 0.636 4 0.961 0.823 0.763 0.683 5 0.951 0.906 0.822 0.784 0.713 0.681 0.593 0.863 0.837 0.621 0.564 0.567 0.507 6 0.888 0.790 0.666 0.630 0.535 0.942 0.933 0.923 7 0.650 0.596 0.547 0.502 0.871 0.760 0.747 0.705 0.665 0.627 0.592 0.746 0.711 0.677 0.645 0.623 0.583 0.540 0.513 0.467 0.482 0.434 0.452 0.404 8 0.853 0.731 0.582 0.544 9 0.914 0.837 0.703 0.500 0.460 0.424 0.391 0.361 10 0.614 0.463 0.386 0.905 0.896 0.820 0.804 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.676 0.650 0.558 0.527 0.508 0.475 0.422 0.388 0.352 0.317 0.322 0.287 11 0.585 0.429 0.350 12 0.887 0.625 0.557 0.444 0.356 0.788 0.773 0.397 0.368 0.319 0.290 0.286 0.258 13 0.497 0.469 0.442 0.879 0.530 0.415 0.326 0.257 0.229 0.205 14 0.601 0.577 0.555 0.870 0.758 0.505 0.388 0.340 0.299 0.263 0.232 0.209 15 0.315 0.183 0.642 0.623 0.481 0.458 0.417 0.394 0.362 0.339 0.239 0.218 16 0.534 0.292 0.188 0.163 17 0.861 0.853 0.844 0.836 0.828 0.743 0.728 0.714 0.700 0.686 0.436 0.317 0.198 0.371 0.350 0.513 0.494 0.475 0.270 0.250 0.275 0.252 0.231 0.212 0.194 18 0.605 0.587 0.570 0.554 0.296 0.416 0.396 0.180 0.164 0.146 0.130 0.116 19 0.277 0.232 0.170 0.153 0.138 0.124 0.074 0.331 0.312 20 0.820 0.673 0.258 0.178 0.149 0.377 0.295 0.215 0.146 0.104 0.059 25 0.456 0.375 0.308 0.780 0.610 0.478 0.233 0.184 0.092 0.116 0.075 30 0.742 0.174 0.099 0.033 0.552 0.453 0.412 0.307 0.228 0.131 0.067 40 0.231 0.142 0.087 0.044 0.015 0.672 0.608 0.208 0.097 0.054 0.046 0.021 0.057 0.022 0.009 0.032 0.013 0.011 0.003 50 0.372 0.141 0.034 0.005 Appendix D Present value of an annuity of $1, PVIFA PVA=A 1 (1 + i)" Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 0.990 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 2 0.980 1.942 2.884 1.886 1.833 1.759 1.859 2.723 1.808 2.624 1.783 2.577 1.690 2.402 3 2.775 2.531 4 3.808 3.630 3.546 3.387 3.240 1.970 2.941 3.902 4.853 5.795 6.728 1.913 2.829 3.717 4.580 5.417 6.230 7.020 5 1.736 2.487 3.170 3.791 4.355 4.868 1.713 2.444 3.102 3.696 4.231 4.712 4.452 2.673 3.465 4.212 4.917 5.582 4.713 5.601 6.472 6 4.329 5.076 5.786 3.312 3.993 4.623 5.206 5.747 5.242 6.002 4.100 4.767 5.389 3.037 3.605 4.111 4.564 3.890 4.486 5.033 7 8 6.733 6.463 5.535 5.146 7.652 8.566 7.325 8.162 6.210 6.802 4.968 5.328 9 7.435 7.108 5.995 10 8.983 7.72 7.786 8.530 9.253 9.954 9.471 10.368 11.255 6.418 5.971 6.515 7.024 7.499 7.943 6.247 6.710 7.139 8.111 8.760 9.385 5.335 5.759 6.145 6.495 6.814 11 5.537 5.889 6.207 6.492 5.650 5.938 7.360 7.887 8.384 8.853 8.306 6.805 9.787 10.575 11.348 12 8.863 7.536 7.904 7.161 7.487 6.194 6.424 13 12.134 9.986 9.394 8.358 7.103 10.635 11.296 14 8.244 7.786 7.367 6.628 8.745 9.108 15 9.899 10.380 10.838 8.559 13.004 13.865 14.718 15.562 16.398 16 8.851 12.106 12.849 13.578 14.292 14.992 15.678 10.563 11.118 11.652 12.166 12.659 13.134 9.295 9.712 10.106 10.477 10.828 11.158 11.938 12.561 13.166 13.754 14.324 14.877 17.413 7.606 7.824 8.022 9.122 17 18 6.750 6.982 7.191 7.379 7.549 7.702 7.839 8.061 8.313 8.544 8.756 8.950 9.447 9.763 10.059 10.336 11.274 11.690 12.085 6.811 6.974 7.120 7.250 7.366 9.372 9.604 8.201 8.365 19 17.226 18.046 20 13.590 9.129 8.514 7.963 16.351 19.523 22.396 25 30 12.462 14.094 15.372 9.818 10.675 22.023 25.808 11.470 12.783 13.765 9.077 10.594 11.654 12.409 15.622 17.292 8.422 9.823 10.274 7.469 7.843 8.055 19.600 11.258 9.427 8.694 40 32.835 17.159 15.046 13.332 10.757 27.355 31.424 23.115 25.730 19.793 21.482 11.925 12.233 9.779 9.915 8.951 9.042 8.244 8.304 50 39.196 18.256 15.762 13.801 10.962