Question
The face value of a bond is $67,000, its stated rate is 7%, and the term of the bond is five years. The bond pays
The face value of a bond is $67,000, its stated rate is 7%, and the term of the bond is five years. The bond pays interest semiannually. At the time of issue, the market rate is 8%.
Determine the present value of the bonds at issuance.
Present value of $1:
4% | 5% | 6% | 7% | 8% | |
5 | 0.822 | 0.784 | 0.747 | 0.713 | 0.681 |
6 | 0.790 | 0.746 | 0.705 | 0.666 | 0.630 |
7 | 0.760 | 0.711 | 0.665 | 0.623 | 0.583 |
8 | 0.731 | 0.677 | 0.627 | 0.582 | 0.540 |
9 | 0.703 | 0.645 | 0.592 | 0.544 | 0.500 |
10 | 0.676 | 0.614 | 0.558 | 0.508 | 0.463 |
Present value of ordinary annuity of $1:
4% | 5% | 6% | 7% | 8% | |
5 | 4.452 | 4.329 | 4.212 | 4.100 | 3.993 |
6 | 5.242 | 5.076 | 4.917 | 4.767 | 4.623 |
7 | 6.002 | 5.786 | 5.582 | 5.389 | 5.206 |
8 | 6.733 | 6.463 | 6.210 | 5.971 | 5.747 |
9 | 7.435 | 7.108 | 6.802 | 6.515 | 6.247 |
10 | 8.111 | 7.722 | 7.360 | 7.024 | 6.710 |
A. $19,020
B. $47,980
C. $64.312
D. $ 67,000
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