Question

Determine the present value of an amortizable coupon bond with a face value of $50,000, which makes annual payments of $15,000 and whose annual issuance rate is 7%, with a maturity date of 4 years and an IRR rate of 8%.

56

likes279 views

Gerhard

4.5

50 Answers

1. Calculate the present value of each coupon payment:

PV_1 = \frac{15000}{(1+0.08)^1} = \frac{15000}{1.08} = 13,888.88

PV_2 = \frac{15000}{(1+0.08)^2} = \frac{15000}{1.1664} = 12,857.14

PV_3 = \frac{15000}{(1+0.08)^3} = \frac{15000}{1.2597} = 11,904.76

PV_4 = \frac{15000}{(1+0.08)^4} = \frac{15000}{1.3605} = 11,029.41

2. Calculate the present value of the face value:

PV_{FV} = \frac{50000}{(1+0.08)^4} = \frac{50000}{1.3605} = 36,764.71

3. Sum the present values to get the bond's present value:

PV = 13,888.88 + 12,857.14 + 11,904.76 + 11,029.41 + 36,764.71 = 86,444.90

2. Calculate the present value of the face value:

3. Sum the present values to get the bond's present value:

Frequently asked questions (FAQs)

What is the equation of a circle with center (-2,3) and radius 4?

+

Write the equation of the tangent function for the angle whose cosine is 1/2.

+

What is the equation of a circle with center at (4, -2) and radius of 5?

+

New questions in Mathematics