Face Value of Bonds

1,000,000

Face or Contract interest rate

4%

Market or Effective interest rate

6%

Number of years

5

Number of interest payments per year

2

Selling Price of Bonds

$914,697.97

In order to use Excel to calculate the bonds selling price, use the present value function. It starts with =PV

Then, tell it the rate at which the market discounts the cash flows, the number of payment periods,

the amound of the cash payment, the amount paid back when the bonds mature, and

whether the payment occurs at the beginning of a payment period or the end of a payment period.

Time Period

Interest Payment

Interest Expense

Amortization of Discount or Premium

Remaining Discount or Premium

Bond Carrying Value