Please answer the finance question. The questions need to be answered within 1 h
ID: 2733846 • Letter: P
Question
Please answer the finance question. The questions need to be answered within 1 hour, that is the deadline. Please answer the question within 1 hour and show all your work. If you cannot show all of your work or do not know how to do the problems, then please do not answer the question.
2. You have just been offered a $1,000 par value bond for $724.70. The coupon rate is 8%, payable semi-annually, while rates on new issues of the same degree of risk are 12%. You want to know how many more interest payments you would be receiving, but the party selling the bond cannot remember. Can you determine how many more interest payments you would receive if you purchased this bond? YOU MUST SHOW ALL WORK TO RECEIVE CREDIT!
Explanation / Answer
So the total semin annual payments is 30. that means 15 years.
No of Installments Interest semi annualyy PVF @ 6% PV of Interest Cumulative PV of Interest PV of Terminal cash flows at an every intrval Total of Cumulative Interest and Terminal cash flows 1 40 0.943396 37.73585 37.73585 943.3962 981.1321 2 40 0.889996 35.59986 73.33571 889.9964 963.3321 3 40 0.839619 33.58477 106.9205 839.6193 946.5398 4 40 0.792094 31.68375 138.6042 792.0937 930.6979 5 40 0.747258 29.89033 168.4946 747.2582 915.7527 6 40 0.704961 28.19842 196.693 704.9605 901.6535 7 40 0.665057 26.60228 223.2953 665.0571 888.3524 8 40 0.627412 25.09649 248.3918 627.4124 875.8041 9 40 0.591898 23.67594 272.0677 591.8985 863.9662 10 40 0.558395 22.33579 294.4035 558.3948 852.7983 11 40 0.526788 21.0715 315.475 526.7875 842.2625 12 40 0.496969 19.87877 335.3538 496.9694 832.3231 13 40 0.468839 18.75356 354.1073 468.839 822.9463 14 40 0.442301 17.69204 371.7994 442.301 814.1003 15 40 0.417265 16.6906 388.49 417.2651 805.755 16 40 0.393646 15.74585 404.2358 393.6463 797.8821 17 40 0.371364 14.85458 419.0904 371.3644 790.4548 18 40 0.350344 14.01375 433.1041 350.3438 783.4479 19 40 0.330513 13.22052 446.3247 330.513 776.8377 20 40 0.311805 12.47219 458.7968 311.8047 770.6016 21 40 0.294155 11.76622 470.5631 294.1554 764.7185 22 40 0.277505 11.1002 481.6633 277.5051 759.1684 23 40 0.261797 10.47189 492.1352 261.7973 753.9324 24 40 0.246979 9.879142 502.0143 246.9785 748.9928 25 40 0.232999 9.319945 511.3342 232.9986 744.3329 26 40 0.21981 8.792401 520.1266 219.81 739.9367 27 40 0.207368 8.294718 528.4214 207.368 735.7893 28 40 0.19563 7.825206 536.2466 195.6301 731.8767 29 40 0.184557 7.38227 543.6288 184.5567 728.1856 30 40 0.17411 6.964405 550.5932 174.1101 724.7034