Question $22$

$22$

$23$

$240$

$10$ points

A $$100,000$ bond was issued on $\frac{1}{1}\frac{?}{10}.$ It pays interest $($coupon$)$ of $6\%$ per annum, with payments occurring every six months. The bond is due in $2$ years. A potential investor wanted to know what the bond should be worth on the day of issue, if the prevailing rate for similar bonds $($market rate$)$ was $8\%.$

An inexperienced accountant attempted to calculate what the bond should be worth on $1/1/10.$ Review the work of the accountant, and answer the questions below pertaining to possible mistakes.

Calculation of present value by inexperienced accountant

$\backslash$table$[[\backslash$table$[[$FV$],[($payme$],[$nt$)]],$Periods of interest,Interest factor,PV$],[4000,1,{1\mathrm{.}04}^3,3,883],[4000,2,1\mathrm{.}0609,3,770],[4000,3,1\mathrm{.}0927,3,661],[4000,4,1\mathrm{.}1255,3,554],[100000,2,1\mathrm{.}0609,94,260],[$TOTAL$,,,$$$109,128$