On October 1 2017 Eastern Timber Inc has available for issue

On October 1, 2017, Eastern Timber Inc. has available for issue $720,000 bonds due in four years. Interest at the rate of 9.50% is to be paid quarterly. Calculate the issue price if the market interest rate is: (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.)

Issue Price

a.10.50%

b.9.50%

c.8.50%

Bond value 720000 Interest rate 9.50% Quaterly interest 22800 If Market Interest rate Amount pvf@10.5% PV @ 10.5% Pvf @ 9.5% PV @ 9.5% pv@ 8.5% PV @8.5% Interest Received Q-1 $22,800 0.97 $22,222 0.98 $22,271 0.98 $22,326 Q2 $22,800 0.95 $21,659 0.95 $21,754 0.96 $21,861 Q3 $22,800 0.93 $21,110 0.93 $21,250 0.94 $21,406 Q4 $22,800 0.90 $20,575 0.91 $20,757 0.92 $20,961 Q5 $22,800 0.88 $20,054 0.89 $20,275 0.90 $20,525 Q6 $22,800 0.86 $19,546 0.87 $19,805 0.88 $20,098 Q7 $22,800 0.84 $19,050 0.85 $19,345 0.86 $19,679 Q8 $22,800 0.81 $18,568 0.83 $18,897 0.85 $19,270 Q9 $22,800 0.79 $18,097 0.81 $18,458 0.83 $18,869 Q10 $22,800 0.77 $17,638 0.79 $18,030 0.81 $18,476 Q11 $22,800 0.75 $17,192 0.77 $17,612 0.79 $18,092 Q12 $22,800 0.73 $16,756 0.75 $17,203 0.78 $17,715 Q13 $22,800 0.72 $16,331 0.74 $16,804 0.76 $17,347 Q14 $22,800 0.70 $15,917 0.72 $16,414 0.74 $16,986 Q15 $22,800 0.68 $15,514 0.70 $16,033 0.73 $16,632 Q16 $22,800 0.66 $15,121 0.69 $15,661 0.71 $16,286 Tota Interest received in 4 year $364,800 $295,351 $300,570 $306,528 Maturity value at the end of 4 year $720,000.00 0.671 $483,120.00 0.69 $496,800.00 0.71 $511,200.00 Total present value of bond $1,084,800 $778,471 $797,370 $817,728

On October 1, 2017, Eastern Timber Inc. has available for issue $720,000 bonds due in four years. Interest at the rate of 9.50% is to be paid quarterly. Calcula

On October 1 2017 Eastern Timber Inc has available for issue

Solution

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