Hw-1731 selling price of bond


APPLY THE CONCEPTS: Calculate the selling price of a bond

Bond indenture


Issue Date: 1/1/2011


Face value: $100,000


Coupon Rate of Interest: 6% annually


Maturity date: 12/31/2013

Additional information

· The market interest rate for bonds of similar risk is 8%.

· Interest is paid out on an annual basis.

· The market price of the bond has yet to be determined.

Part 1: Calculate the present value of the face amount to be received at maturity.


Part 2: Calculate the present value of the interest payments to be paid out periodically


Part 3: Add the figures calculated in parts 1 and 2 together.