These present values are found using Excel or a calculator (sec directions to the side). We also can find present value if the market rate is in present value tables. The annual market rate is 9.97%, or 4.9851% semiannually. In this case, go to Table B.1 Excerpt, row 4, and across to the 4.9851% column, where the present value factor is 0.8232 for the maturity payment. Second, go to Table B.3 Excerpt, row 4, and across to the 4.9851% column, where the present value factor is 3.5467 for the series of interest payments. The bonds' price is computed by multiplying the cash flow payments by their present value factors and adding them-see Exhibit 144.2. EXHIBIT 144.2 Computing Issue Price for Adidas Premium Bonds Present Value Present Cash Flow Table Factor Value $100,000 par (maturity) valve B.1 Excerpt(PV of 1) $100,000 $6,000 interest payments B.3 Excerpt (PV of ann) Price of bond (using a 4.9851% semiannual market rate) Amount 0.8232 3.5467 $ 82,320 21.280 6,000 $103,600 Calculator N=4 PMT 6.000 1/1 =49851 FV = 100.000 PV = 103,600 Point: Calculator inputs defined: N Number of semiannual periods I/Y Market rate per semiannual period FV Future (maturity) value PMT Payment (interest) per semiannual period PV Price (present value) Excel: Bond pricing B 1 Annual contract rate 12% 2 Annual market rate 9.97% 3 Payments within yr 2. 4 Years to maturity 2. 5 Par (face) value $100,000 6 Issue price =-PV(B2/B3,B3-B4,B5-B1/B3,B5) un hornt Decision Insight Equivalent Payments Concept Present value factors can be thought of as equivalent payments. For example, using Exhibit 144.1, one payment of $100,000 scheduled two years from today is the equivalent of a 08222 payment of $100,000 today (assuming a market with 10.031% return), Similarly, four semiannual payments of $4,000 over the next two years are equivalent to 3.5449 payments of $4,000 today (again, assuming a 10.031% return)