APPLY THE CONCEPTS: Calculate the selling price of a bond
Issue Date: 1/1/2011
Face value: $100,000
Coupon Rate of Interest: 6% annually
Maturity date: 12/31/2013
· 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.