Bond assessment:
<span>Face value = Maturity value = FV = $1,000 </span>
<span>Annual coupon rate = 7.5% </span>
<span>Remaining years to maturity = N = 19 </span>
<span>Required return = I/YR = 5.5% </span>
<span>(Coupon rate)(Face value) = PMT = $75 </span>
<span>Present value = $1,232.15</span>
(a) $240,000 divided by 4 equals $60,000, which is 25% of the average of ($480,000 + $0) divided by 2 gives $240,000. (b) Yearly Present Value of $1 at 15% and Net Cash Flow Present Value: 1.870 gives $210,000 as $182,700, 2.756 gives $200,000 as $151,200, 3.658 gives $160,000 as $105,280, and 4.572 gives $150,000 as $85,800. Total is $720,000 with a Present Value of $524,980. The amount to be invested is $480,000. Therefore, Net Present Value is $44,980.
