5. Compute the price of $3,461,181 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 $
To compute the price of $3,461,181 received for the bonds using the tables of present value in Appendix A, you need to determine the present value of the face amount and the present value of the semi-annual interest payments.
1. Present value of the face amount:
- Look for the interest rate and number of periods on the present value table that match the characteristics of the bond you are valuing.
- Find the factor that corresponds to the interest rate and number of periods.
- Multiply the face amount of the bond by the factor from the table to find the present value of the face amount.
2. Present value of the semi-annual interest payments:
- Determine the interest rate per period (semi-annual interest rate).
- Use the present value formula or table to calculate the present value of a semi-annual payment stream over the remaining periods of the bond.
- Multiply the semi-annual interest payment by the present value factor to find the present value of the semi-annual interest payments.
3. Price received for the bonds:
- Add the present value of the face amount to the present value of the semi-annual interest payments.
- Round the total to the nearest dollar.
Please refer to Appendix A and the specific details of the bond (interest rate, number of periods, etc.) to find the exact factors and calculate the price of $3,461,181 received for the bonds using the present value tables.