Problem: On January 1, 2016, the Auto-Stop Corporation issued bonds in the amount of $10,000 that will be paid in three years. Interest of $400 is payable semiannually each January 1 and July 1 with the first interest payment at the end of the period, on July 1 of the current year. Draw a time line of the bond's cash outflows. If the market rate of interest is 10%, what is the amount of the bond issue proceeds (cash received) when Auto-Stop Corporation issued the bonds? PV Single Sum = ? PV Ordinary Annuity = ? $400 $10,000 $400 $400 $400 $400 $400 - t=0 1 2 3 4 5 T = 6 I/Y = 5%, N = 6 Use PV formula in Excel (fx) to compute the PV of the cash outflows related to bond issuance: Fill in the formula in ? Your answers should be (1) PV of Single Sum 7,462.15 (2) PV of Ordinary Annuity 2,030.28 Total PV 9,492.43 This should be equal to the amount of the bond issue proceeds (cash received) Problem: On January 1, 2016, the Auto-Stop Corporation issued bonds in the amount of $10,000 that will be paid in three years. Interest of $400 is payable semiannually each January 1 and July 1 with the first interest payment at the end of the period, on July 1 of the current year. Draw a time line of the bond's cash outflows. If the market rate of interest is 10%, what is the amount of the bond issue proceeds (cash received) when Auto-Stop Corporation issued the bonds? PV Single Sum = ? PV Ordinary Annuity = ? $400 $10,000 $400 $400 $400 $400 $400 - t=0 1 2 3 4 5 T = 6 I/Y = 5%, N = 6 Use PV formula in Excel (fx) to compute the PV of the cash outflows related to bond issuance: Fill in the formula in ? Your answers should be (1) PV of Single Sum 7,462.15 (2) PV of Ordinary Annuity 2,030.28 Total PV 9,492.43 This should be equal to the amount of the bond issue proceeds (cash received)