Homework SoursePV interest Calculate in Excel the cash received and annual
PV interest
Calculate in Excel, the cash received, and annual cash required with formulas visibile, as well as all other info.
| The company could issue $2,500,000 of long-term bonds, due in 6 years with a stated rate of interest, paid semiannually, of 3%. The market rate for similar debt is 4%. | |||||||||
| Cash Received | Annual Cash Required | ||||||||
| Face amount | |||||||||
| Face rate | |||||||||
| Interest Payment periods | |||||||||
| Interest Payment | |||||||||
| Term | |||||||||
| Periods | |||||||||
| Market rate | |||||||||
| PV factors used | single sum | ||||||||
| annuity | |||||||||
| PV face | |||||||||
| PV interest Calculate in Excel, the cash received, and annual cash required with formulas visibile, as well as all other info. |
Solution
Answers
Face amount
$ 2,500,000.00
Face Rate
3%
Interest payment periods
12
Interest payment
$ 37,500.00
Term
6 years
Market Rate
4%
PV factors used:
PV factor $1
0.788493175582
PV Annuity Factor $1
10.575341220917
PV Face Value
$ 1,971,232.94
PV Interest
$ 396,575.30
Issue price of Bonds
$ 2,367,808.00
Face amount
$ 2,500,000
Face Rate
3% [Semi annual = 1.5%]
Interest payment periods
12 [ 6 years x 2 semi annual payment each year]
Interest payment
=2500000*3%*6/12
Term
6 years
Market Rate
4% [rate to be used for Pv = 4%/2 semi annual = 2%]
PV factors used:
PV factor $1
=PV(4%/2,12,,1)*-1
PV Annuity Factor $1
=PV(4%/2,12,1)*-1
PV Face Value [Face value x PV factor $1]
=2500000*0.788493175582
PV Interest [Interest value x PV annuity factor $1]
=37500*10.575341220917
Issue price of Bonds
=1971233+396575
| Face amount | $ 2,500,000.00 |
| Face Rate | 3% |
| Interest payment periods | 12 |
| Interest payment | $ 37,500.00 |
| Term | 6 years |
| Market Rate | 4% |
| PV factors used: | |
| PV factor $1 | 0.788493175582 |
| PV Annuity Factor $1 | 10.575341220917 |
| PV Face Value | $ 1,971,232.94 |
| PV Interest | $ 396,575.30 |
| Issue price of Bonds | $ 2,367,808.00 |
