Answer:
Case A:$100,000
Case B:$111,164.76
Case C:$94,967.05
Explanation:
The issue price of the bond can be computed using the excel pv formula stated below:
=-pv(rate,nper,pmt,fv)
Case A:
Rate is the market interest rate of 8%
nper is the number of coupon interest payable by the bond which is 7
pmt is the annual coupon interest of $8,000 (8%*$100,000)
fv is the face value of $100,000
=-pv(8%,7,8000,100000)=$100,000
Case B:
Rate is the market interest rate of 6%
nper is the number of coupon interest payable by the bond which is 7
pmt is the annual coupon interest of $8,000 (8%*$100,000)
fv is the face value of $100,000
=-pv(6%,7,8000,100000)=$111,164.76
Case C:
Rate is the market interest rate of 9%
nper is the number of coupon interest payable by the bond which is 7
pmt is the annual coupon interest of $8,000 (8%*$100,000)
fv is the face value of $100,000
=-pv(9%,7,8000,100000)=$94,967.05
