Compute the price of $7,936,343 received for the bonds by using the tables of present value in Appendix A. (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences.
Present value of the face amount $
Present value of the semi-annual interest payments $
Price received for the bonds $
We have access to no book or program. Therefore we have no idea what is in Appendix A.
Sra
I noticed that after posting the question you can find a present table by searching on google
To compute the price of $7,936,343 received for the bonds using the tables of present value in Appendix A, we need to calculate the present value of the face amount and the present value of the semi-annual interest payments.
1. Present value of the face amount:
- Find the present value factor for the term of the bond in Appendix A. This factor represents the present value of $1 to be received in the future.
- Multiply the face amount ($7,936,343) by the present value factor found in the table. This will give us the present value of the face amount.
For example, if the present value factor for the term of the bond is 0.873, then:
Present value of the face amount = $7,936,343 * 0.873 = $6,928,305
2. Present value of the semi-annual interest payments:
- Calculate the periodic interest payment by dividing the annual interest payment by the number of periods per year.
- Find the present value factor for the term of the bond and the number of periods per year in Appendix A. This factor represents the present value of a series of equal payments to be received in the future.
- Multiply the periodic interest payment by the present value factor found in the table. This will give us the present value of the semi-annual interest payments.
- Multiply the present value of the semi-annual interest payments by the number of periods in the bond to get the total present value of the interest payments.
For example, if the annual interest payment is $500,000, the number of periods per year is 2, and the present value factor for the term of the bond and 2 periods is 0.825, then:
Periodic interest payment = $500,000 / 2 = $250,000
Present value of the semi-annual interest payments = $250,000 * 0.825 = $206,250
Total present value of the interest payments = $206,250 * (number of periods in the bond)
3. Price received for the bonds:
- Add the present value of the face amount to the total present value of the interest payments.
- Round the result to the nearest dollar.
For example, if the present value of the face amount is $6,928,305 and the total present value of the interest payments is $2,061,250, then:
Price received for the bonds = $6,928,305 + $2,061,250 = $8,989,555