You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 11 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 25 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Bond price b. With 20 years to maturity, if yield to maturity goes down substantially to 10 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) New bond price Appendix B Present value of $1, PVF 1 PV = FV ((1+1) Period 1% 3% 4% 5% 8% 9% 11% 12% 1 0.901 0.893 0.990 0.980 0.962 0.925 Percent 6% 7% 0.943 0.935 0.890 0.873 0.840 0.816 0.792 0.763 0.917 0.842 2 0.971 0.943 0.915 0.888 0.926 0.857 0.794 0.952 0.907 0.864 0.823 0.812 10% 0.909 0.826 0.751 0.683 0.797 3 0.889 0.772 0.731 0.971 0.961 0.712 0.636 4 0.855 0.735 0.708 0.659 5 0.951 0.863 0.747 0.681 0.593 0.567 0.713 0.666 0.650 0.596 6 0.837 0.630 0.535 0.507 0.942 0.933 7 0.813 0.547 0.482 0.452 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 8 0.923 0.583 0.540 0.500 0.463 0.434 0.391 9 0.623 0.582 0.544 0.508 0.475 0.914 0.905 0.896 10 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 0.404 0.361 0.322 0.502 0.460 0.422 0.388 0.356 0.326 11 0.429 0.397 12 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.887 0.444 0.287 0.257 0.229 13 0.368 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.375 0.308 0.879 0.870 0.861 14 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.417 0.394 0.371 0.350 0.331 0.312 0.233 0.174 0.097 0.054 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.340 0.315 0.299 0.275 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.092 0.057 0.022 0.415 0.388 0.362 0.339 0.317 0.296 0.205 0.183 15 16 0.853 0.728 0.458 0.252 0.292 0.270 0.250 0.163 0.146 17 18 0.587 0.153 0.130 19 0.844 0.836 0.828 0.820 0.780 0.232 0.138 20 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.277 0.258 0.184 0.215 0.124 0.436 0.416 0.396 0.377 0.295 0.231 0.142 0.087 0.231 0.212 0.194 0.178 0.116 0.075 0.032 0.013 0.570 0.554 0.478 0.412 0.307 0.228 25 0.146 0.074 0.044 0.116 0.104 0.059 0.033 0.011 30 0.742 0.131 0.099 40 0.672 0.208 0.067 0.046 0.015 50 0.608 0.372 0.141 0.034 0.021 0.009 0.005 0.003 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.870 0.862 0.855 0.840 0.833 0.769 0.741 0.714 0.847 0.718 0.800 0.640 0.667 0.444 2 0.756 0.743 0.510 0.783 0.693 0.769 0.675 0.731 0.624 0.706 0.593 0.694 0.579 0.549 0.406 3 0.658 0.609 0.592 0.455 0.350 0.641 0.552 0.296 0.512 0.410 4 0.613 0.592 0.572 0.534 0.515 0.482 0.301 0.364 0.260 0.186 0.499 0.419 0.198 5 0.519 0.497 0.476 0.456 0.437 0.402 0.223 0.132 6 0.543 0.480 0.425 0.390 0.370 0.456 0.400 0.432 0.376 0.410 0.354 0.352 0.296 0.335 0.279 0.328 0.262 0.210 0.269 0.207 0.159 0.165 0.122 0.133 0.095 0.088 0.059 7 0.333 0.314 8 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.123 .091 0.068 0.039 0.168 0.134 9 0.225 0.026 0.333 0.295 0.308 0.270 0.284 0.247 0.263 0.227 0.243 0.208 0.209 0.176 0.194 0.162 0.094 0.073 .067 0.050 .048 0.035 10 0.191 0.107 .017 11 0.261 0.195 0.025 0.237 0.208 0.178 0.152 0.162 0.137 0.135 0.1 12 0.086 0.069 0.056 0.043 0.012 0.008 12 0.231 0.018 0.168 0.145 0.037 0.027 0.020 .015 13 0.204 0.182 0.130 0.1 16 0.093 0.055 0.033 .013 0.005 14 0.181 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.160 0.125 0.111 .099 0.078 0.044 0.025 .009 .003 15 0.084 0.108 .093 .011 0.095 0.081 0.148 0.124 0.104 0.088 0.074 0.062 0.052 0.044 0.037 0.065 0.054 0.035 0.028 .020 0.015 0.006 0.005 0.002 0.002 16 0.160 0.141 0.125 0.111 0.008 0.140 0.123 0.108 0.095 0.071 0.060 17 .080 0.069 0.045 0.023 0.012 0.006 .003 0.001 18 0.059 0.038 .018 .009 0.005 0.002 .001 0.081 0.070 0.051 0.043 19 0.098 0.014 20 0.087 0.047 0.026 0.083 .073 0.038 0.020 0.005 0.069 0.060 0.051 0.024 0.012 0.003 0.061 0.030 0.015 0.051 0.043 0.020 0.009 0.002 25 .037 0.016 0.007 0.031 .026 0.010 0.004 .031 0.013 0.005 0.007 0.005 0.001 0.012 0.004 0.001 0.003 0.002 0.001 0.002 .00 1 30 40 0.008 0.004 0.001 0.001 0.001 0 50 0.002 0.001 0.001 0.001 Appendix D Present value of an annuity of $1, PVIFA PVA= A1- 1 (1 + i)" Period 2% 3% 4% 5% 8% 9% 11% 12% 10% 0.909 1 0.980 0.962 0.952 0.926 0.901 0.893 1% 0.990 1.970 2.941 2 1.886 1.859 1.783 0.917 1.759 2.531 1.736 1.713 1.942 2.884 1.690 3 2.775 2.487 2.444 2.577 3.312 2.402 3.037 4 3.902 3.808 3.240 3.102 5 4.853 3.630 4.452 5.242 2.723 3.546 4.329 5.076 5.786 3.696 3.993 4.623 5.206 3.890 4.486 3.605 4.111 6 7 6.002 5.033 4.231 4.712 5.146 4.564 8 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.463 5.747 4.968 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 5.795 6.728 7.652 8.566 9.471 10.368 11.255 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 9 7.108 7.722 5.535 5.995 6.418 6.805 10 6.247 6.710 7.139 7.536 5.537 5.889 6.207 5.328 5.650 5.938 11 8.306 Percent 6% 7% 0.943 0.935 1.833 1.808 2.673 2.624 3.465 3.387 4.212 4.100 4.917 4.767 5.582 5.389 6.210 5.971 6.802 6.515 7.360 7.024 7.887 7.499 8.384 7.943 8.853 8.358 9.295 8.745 9.712 9. 108 10.106 9.447 10.477 9.763 10.828 10.059 11.158 10.336 11.470 10.594 12.783 11.654 13.765 12.409 15.046 13.332 15.762 13.801 12 8.863 7.161 6.814 6.492 6.194 13 12.134 11.348 9.394 7.904 8.244 6.424 6.628 14 12.106 12.849 15 9.899 10.380 10.838 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590 15.622 17.292 19.793 21.482 7.487 7.786 8.061 8.313 8.544 8.756 6.811 6.974 16 6.750 6.982 7.191 7.379 7.549 7.702 13.004 13.865 14.718 15.562 16.398 17.226 18.046 22.023 8.559 8.851 9.122 9.372 17 7.120 18 13.166 13.754 14.324 7.250 7.366 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 9.077 9.427 9.779 9.915 19 9.604 8.950 13.578 14.292 14.992 15.678 16.351 19.523 22.396 27.355 31.424 7.839 20 25 11.274 11.690 12.085 12.462 14.094 15.372 17.159 18.256 14.877 17,413 9.818 10.675 11.258 11.925 30 25.808 19.600 9.129 9.823 10.274 10.757 10.962 7.963 8.422 8.694 8.951 9.042 7.469 7.843 8.055 8.244 8.304 40 32.835 39.196 23.115 25.730 50 12.233 Appendix D (concluded) Present value of an annuity of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.862 0.847 0.840 0.833 0.800 0.769 0.741 0.714 0.667 0.877 1.647 2 0.870 1.626 2.283 1.668 2.361 1.361 0.855 1.585 2.210 1.111 1.605 2.246 1.566 2.174 1.547 2.140 1.528 2.106 1.440 1.952 1.289 1.696 1.224 1.589 3 2.322 1.816 1.407 4. 2.914 2.855 2.690 2.639 2.589 2.362 2.166 1.997 1.849 1.605 2.974 3.517 2.798 3.274 2.743 3.199 5 3.433 3.352 3.127 3.058 2.991 2.689 2.436 2.220 2.035 1.737 6 3.998 3.889 3.784 3.685 3.498 3.410 3.326 2.951 2.643 2.385 1.824 3.589 3.922 2.168 2.263 7 4.288 4.160 3.812 3.706 3.161 2.802 2.508 4.423 4.799 3.605 3.837 1.883 1.922 8 4.639 4.487 4.207 4.078 3.954 3.329 2.598 2.925 3.019 2.331 2.379 9 5.132 4.946 4.451 4.303 4.163 4.031 2.665 4.039 4.344 4.607 4.833 5.029 5.197 3.463 3.571 4.772 5.019 5.234 1.948 1.965 10 5.426 5.216 4.659 4.494 4.339 4.192 3.092 2.715 2.414 11 5.687 5.453 4.836 4.486 3.656 3.147 2.438 4.656 4.793 4.327 4.439 12 5.918 5.660 5.421 4.988 4.611 3.725 3.190 2.752 2.779 2.799 2.456 13 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 3.780 3.223 2.469 1.977 1.985 1.990 1.993 1.995 14. 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 3.824 3.249 2.814 2.478 2.484 15 6.142 5.575 5.324 5.092 4.876 3.859 3.268 2.825 16 3.283 6.462 6.604 6.729 6.840 5.847 5.954 6.047 6.128 6.265 6.373 6.467 17 5.668 5.749 5.818 5.405 5.475 5.534 5.162 5.222 5.273 5.316 4.675 4.730 4.775 4.812 4.938 4.988 5.033 5.070 3.887 3.910 3.928 3.295 3.304 2.834 2.840 2.844 2.489 2.492 2.494 1.997 1.998 1.999 18 19 6.938 6.550 6.198 5.877 5.584 4.843 3.942 2.848 2.496 1.999 3.311 3.316 20 5.929 5.628 5.353 3.954 2.850 1.999 7.025 7.330 6.623 6.873 7.003 6.259 6.464 5.101 5.195 2.497 2.499 25 5.766 5.467 3.985 3.329 2.856 2.000 6.097 6.177 30 7.496 6.566 5.829 5.235 4.870 4.948 4.979 4.997 4.999 3.995 2.857 2.500 5.517 5.548 2.000 3.332 3.333 40 7.634 7.105 6.642 6.233 5.871 5.258 3.999 2.857 2.500 2.000 50 7.675 7.133 6.661 6.246 5.880 5.554 5.262 4.000 3.333 2.857 2.500 2.000