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Matt Enterprises issued $200,000 of ten percent, five-year bonds with interest payable semiannually. Determine the issue price if the bonds are priced to yield

(a) ten percent,
(b) six percent, and
(c) 12 percent.
Use financial calculator or Excel to calculate answers. Round answers to the nearest whole number.

Respuesta :

agustinsr99

Answer: The answers are:

A) $200,000.

B) $258,881.

C) $177,399.

Explanation: The values to put in the financial calculator are:

Future value = $ 200.000.

Payment = $ 200,000 x 0,10 = $ 20,000.

n = 5 x 2 = 10. (Number of semesters in 5 years).

YTM = (a) ten percent,  (b) six percent, and  (c) 12 percent.

A) Price or Present value = $200,000.

B) Price or PV = $258,881.

C) Price or PV = $177,399.

The issue price if the bonds are priced to yield 10% is $200,000.

The issue price if the bonds are priced to yield 6% is $234,120.81.

The issue price if the bonds are priced to yield 12% is $185,279.83.

What is the issue price of the bonds?

The issue price of the bonds can be determined by determining the present value of the bonds. Present value is the sum of discounted cash flows.

  • Cash flow each year from year 1 to 10 = (10%/2) x 200,000 = $10,000
  • Cash flow in year 10 = $200,000
  • Price if the yield is 10% = $200,000
  • Price if the yield is 6% =  $234,120.81.
  • Price if the yield is 12% = $185,279.83.

To learn more about present value, please check: https://brainly.com/question/26537392

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