You are called in as a financial analyst to appraise the bonds of Olsens 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 10 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.

b. With 5 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.)

1 Appendix B Present value of $1, PVF PV = FV + Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 0.943 0.909 0.901 0.935 0.873 2 0.826 0.812 0.990 0.980 0.971 0.961 0.951 0.980 0.961 0.942 0.924 0.971 0.943 0.915 0.888 0.926 0.857 0.794 0.962 0.925 0.889 0.855 0.952 0.907 0.864 0.823 0.784 0.746 3 0.917 0.842 0.772 0.708 0.893 0.797 0.712 0.636 0.890 0.840 0.792 0.747 0.705 0.816 0.763 0.713 0.751 0.683 4 0.731 0.659 0.735 0.681 5 0.906 0.593 0.567 0.863 0.837 0.822 0.790 0.650 0.596 0.621 0.564 6 0.942 0.888 0.666 0.630 0.535 0.507 7 0.933 0.711 0.665 0.583 0.547 0.513 0.452 0.871 0.853 0.760 0.731 0.813 0.789 0.766 0.623 0.582 8 0.627 0.923 0.914 0.404 0.677 0.645 0.502 0.460 9 0.837 0.703 0.361 0.592 0.558 10 0.905 0.544 0.508 0.475 0.676 0.650 0.322 0.422 0.388 0.540 0.500 0.463 0.429 0.397 0.467 0.424 0.386 0.350 0.319 11 0.820 0.804 0.788 0.773 0.758 0.896 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.744 0.722 0.701 0.681 0.661 12 0.614 0.585 0.557 0.530 0.505 0.625 0.887 0.879 0.870 0.861 0.853 13 0.601 0.527 0.497 0.469 0.442 0.417 0.287 0.257 0.229 0.205 0.444 0.415 0.388 0.356 0.326 0.299 0.290 0.263 14 0.368 0.340 0.315 0.292 15 0.743 0.577 0.555 0.534 0.362 0.275 0.642 0.623 0.239 0.481 0.458 0.209 0.188 0.183 0.163 16 0.728 0.394 0.339 0.252 0.218 17 0.844 0.714 0.513 0.436 0.371 0.270 0.231 0.198 0.170 0.146 18 0.494 0.250 0.836 0.828 0.153 0.700 0.686 0.605 0.587 0.570 0.554 0.317 0.296 0.277 0.416 0.396 0.350 0.331 0.212 0.194 0.180 0.164 0.130 0.116 19 0.475 0.232 0.138 0.820 0.673 0.377 0.258 0.124 20 25 0.456 0.375 0.312 0.233 0.149 0.092 0.104 0.059 0.780 0.478 0.295 0.074 30 0.044 0.610 0.552 0.453 0.372 0.742 0.672 0.608 0.033 0.412 0.307 0.228 0.308 0.208 0.141 40 0.215 0.146 0.099 0.046 0.021 0.231 0.142 0.087 0.178 0.116 0.075 0.032 0.013 0.184 0.131 0.067 0.034 0.174 0.097 0.054 0.057 0.022 0.009 0.015 0.005 0.011 0.003 50 Appendix D Present value of an annuity of $1, PVIFA PVA= A 1- 1 (1 + i)" Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.901 1.713 2 1.970 1.942 1.913 1.886 1.859 1.808 1.783 1.759 1.690 1.833 2.673 3 2.941 2.829 2.775 2.884 3.808 2.402 2.723 3.546 2.624 3.387 2.577 3.312 1.736 2.487 3.170 2.531 3.240 2.444 3.102 4 3.902 3.630 3.465 3.037 5 4.853 3.717 4.580 5.417 4.452 4.212 3.993 3.890 3.791 4.713 5.601 3.605 4.329 5.076 3.696 4.231 6 5.795 4.111 4.917 5.582 4.623 5.206 4.355 4.868 7 6.728 6.230 5.786 4.486 5.033 5.535 4.712 4.564 5.242 6.002 6.733 7.435 8 7.652 6.472 7.325 8.162 8.983 9.787 9 8.566 9.471 7.020 7.786 8.530 6.210 6.802 7.360 5.335 5.759 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 5.747 6.247 6.710 5.995 6.418 5.146 5.537 5.889 4.968 5.328 5.650 10 8.111 6.463 7.108 7.722 8.306 8.863 9.394 6.145 11 8.760 6.495 10.368 11.255 12.134 7.887 8.384 6.207 6.492 10.575 12 13 9.385 7.139 7.536 7.904 9.253 9.954 10.635 11.296 11.938 6.805 7.161 7.487 7.786 6.814 7.103 5.938 6.194 6.424 11.348 9.986 8.853 6.750 14 9.899 9.295 8.244 13.004 13.865 12.106 12.849 10.563 11.118 11.652 8.745 9. 108 15 6.628 6.811 9.712 8.559 7.367 7.606 7.824 6.982 7.191 7.379 16 14.718 10.380 10.838 11.274 13.578 10.106 9.447 8.061 8.313 8.544 8.851 12.561 13.166 6.974 17 14.292 9.763 9.122 8.022 7.549 18 15.562 16.398 17.226 11.690 12.166 12.659 13.134 14.992 15.678 9.372 10.477 10.828 11.158 13.754 14.324 8.201 8.756 8.950 7.702 7.839 7.120 7.250 7.366 7.469 19 12.085 9.604 8.365 20 18.046 11.470 14.877 17.413 16.351 19.523 22.396 12.462 14.094 25 9.129 9.823 22.023 25.808 8.514 9.077 10.059 10.336 10.594 11.654 12.409 13.332 13.801 9.818 10.675 11.258 13.590 15.622 17.292 19.793 21.482 30 15.372 9.427 12.783 13.765 15.046 15.762 19.600 23.115 25.730 10.274 10.757 7.963 8.422 8.694 8.951 9.042 7.843 8.055 8.244 8.304 40 32.835 39.196 27.355 31.424 17.159 18.256 11.925 12.233 9.779 9.915 50 10.962