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Margarita [4]
3 years ago
14

Barry’s Steroids Company has $1,000 par value bonds outstanding at 13 percent interest. The bonds will mature in 30 years. If th

e percent yield to maturity is 11 percent, what percent of the total bond value does the repayment of principal represent? Assume interest payments are annual. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Business
1 answer:
labwork [276]3 years ago
6 0

Answer:

Total Present Value is ($1130.194 + $43.7) =   $1173.894

Explanation:

11 percent yield to maturity

TO CALCULATE: Present Value of Interest Payments

PV_A = A × PVIFA (n = 30, i = 11%)               Appendix D

 where A  =  13% of 1000 = 130

from PVIFA table , for n = 30 and i = 11%, PVIFA value is 8.6938

PV_A = $130 × 8.6938 = $1130.194

TO CALCULATE : Present Value of Principal Payment

PV = FV × PVIF (n = 30, i = 11%)          

from PVIF table , for n = 30 and i = 11%, PVIF value is 0.0437

PV = $1,000 × 0.0437 = $43.7

From above calculation we have following conclusion

Present Value of Interest Payments is  $1130.194

Present Value of Principal Payment is   $43.7

therefore Total Present Value is ($1130.194 + $43.7) =   $1173.894

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