What would you pay for a $50,000 debenture bond that matures in 15 years and pays $5,000 a year in interest if you wanted to earn a yield of: (Round computations to 2 decimal places and use the rounded amounts to calculate the final answer. Round the final answer to 2 decimal places.

Question

(a) 8%?

Answer 1

$50,000 x .31524 = $15,762.00
+$5,000 x 8.55948 = $42,797.40

You would pay a total of $58,559.40

Pro tip: Use the tables in book to find .31524 (which is 8% @ 15 periods for present value of 1) and 8.55948 (which is 8% @ 15 periods for present value of an ordinary annuity of 1)