PV= Annuity*(1- (1/1+r)^n)/r
Your r is 5% but you need to calculate the annuity as well: 400000*.04=16000 (payable 6 months)
Put in the formula and your answer will be =199395.3655
Secondly at maturity your PV would be:
400000/(1+r)^n= 150755.7931
Now to come to your actual PV, add the annuity due PV and maturity due
your answer would be:350151.1586$$
I don't use calculators ONLY excel !! I still didn't understand how you got 48639$ ?? You must have used the wrong formula.
Present Value of a Semiannual Bond?
Hi all,
Here is the question that I am having trouble with. I have already tried it myself but can't get the same answer.
A company issues a $400,000 of 10-year bonds with a stated rate of 8%. The effective interest rate for such securities at the time of issuance was 10%.
What are the proceeds from the issuance assuming they're semiannual bonds?
N = 20
I = 5
FV = 400000
PMT = -16000
What is the PV?
I keep getting $48,639 but the answer is $350,151.
Any ideas? I am using a TI 83 calculator
Thank you!!!
