Answer:
4%=$566,697.09
6%=$505,500
8.5%=$ 439,842.50
Explanation:
The issue price of the bond can be computed using the pv formula in excel spreadsheet as below:
=-pv(rate,nper,pmt,fv)
the rate is the market of 4% divided by 2
nper is the number of semiannual interest the bonds would pay which is 7 years multiplied by 2 i.e 14
pmt is the semiannual coupon interest on the bond,which is $505,500*6%*6/12=$15165
fv is the face value repayable on redemption which is $505,500
for market rate of 4%
=-pv(2%,14,15165
,505500)=$566,697.09
for market rate of 6%
=-pv(3%,14,15165
,505500)=$ 505,500.00
for market interest of 8.5%
=-pv(4.25%,14,15165
,505500)=$ 439,842.50
