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School has issued a new bond, faced at $1000, maturing in 20 years. It pays interest semi-annually, at 8% nominal. The interest rate of similar School bonds has decreased to 6%. What is the current market value of the School bond?

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

Atari needs $4.5 million in new investment capital to develop and market downloadable games software for its new GPS2-ZX system. The plan is to sell $10,000 face-value corporate bonds at a discount of $9000 now. A bond pays a divident each 6 months based on a bond interest rate of 5% per year with the $10,000 face value returned after 20 years. Will a purchase make at least 6% per year compounded semiannually?

a) A compnay signs a contract with a supplier to buy $2M worth of services now to be followed by 10 more. What is the present worth of the contract, assuming a MARR of 7%? Answer in millions of dallars


b) A 6% coupon rate bond has a face value of $1,000, pays interest semi-annually and matures in 10 years. If the current market rate is 8%, compounded semi-annually, what is the bond's value today?


c)A company wants to set up a perpetual care fund to cover future expenses for 75 years expenses for 75 years. The initial cost is $5,000 and routine maintenance will cost $200 per year. Every 5thyear, a major cleaning must be done, at an extra cost of $300. The bath is to be demolished after 75 years, with the last $500 covering the demolition costs. If the MARR is 8%, what is the capitalized cost of this project?


d) A B C D

Cost 75K 50K 15K 90K

Annual Benefit 18.8K 13.9K 4.5K 23.8K

Each alternative has a five-year useful life, no salvage value and the MARR is 10%. What is the best option, using Payback? Answer in years to 1 decimal place

P.S Please show me the full solution too Thank you.

(a) Assume that a one year bond that has no interest coupon payment with a maturity value (face value) of $1,000 sold for $800. What is the interest rate that this bond will pay when it matures? Please show how you got your answer.


(b) If the prices of similar bonds are selling next month for $70, what is the interest rate that these bonds pay now when they mature. Please show how you got your answer.

(c) Please describe the relationship between bond prices and interest rates. Use the numbers above to support your answer.

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