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Home Q & A Board Science-Related Homework Help Mathematics
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Lada Lada
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6 years ago
A 4.5% annuity bond of $500 000 with interest payable quarterly is to be redeemable at par in seven years.
a) What is the purchase price to yield 6% compounded quarterly?
b) What is the book value after 6 years?
c) What is the gain or loss if the bond is sold six years after the date of purchase at
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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#1
6 years ago
a) Discount = [500000.00 * .01125 - 500000.00 * .015]
   = -1875.00(22.7267167) = -$42612.59
   PP = 500000.00 - 42612.59 = $457 387.41
b) Discount = 500000.00(-.00375)
   -1875.00(3.8543847) = -$7226.97
   Book value = 500000.00 - 7226.91 = $492 773.09
c) Proceeds: 500000.00 * .99625   = $498 125.00
   Gain    $    5351.91
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