Question
A $4,500 bond pays interest at 7% compounded semi-annually. The bond is redeemable in 1 year 6 months, and is purchased to yield 8%. Find
A $4,500 bond pays interest at 7% compounded semi-annually. The bond is redeemable in 1 year 6 months, and is purchased to yield 8%.
- Find the purchase price of the bond.
- Calculate the premium or discount.
- Construct the appropriate bond schedule, including the totals for Bond Interest, Interest on Book Value at Yield, and Premium Amortized or Discount Accumulated.
1. Find the purchase price of the bond.
| PMT Setting | |
| N | |
| I/Y | |
| P/Y | |
| C/Y | |
| PV | |
| PMT | |
| FV |
2. Calculate the premium or discount.
3. Construct the appropriate bond schedule, including the totals for Bond Interest, Interest on Book Value at Yield, and Premium Amortized or Discount Accumulated.
| Payment Interval | Bond Interest | Interest on Book Value at Yield | Premium Amortized or Discount Accumulated | Book Value | Remaining Premium or Discount |
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Entrepreneurial Finance
Authors: Gary E. Gibbons, Robert D. Hisrich, Carlos Marques DaSilva
1st Edition
1452274177, 978-1452274171
