Problem 13-02 a. A $1,000 bond has a 5.5 percent coupon and matures after ten years. If current interest rates are 10 percent, what should be the price of the bond? Assume that the bond pays interest annually e Use Appendix Band Appendix D to answer the question. Round your answer to the nearest dellar b. If after five years interest rates are still 10 percent, what shouid be the price of the bond? Use Appendix 8 and Appendix D to answer the question. Assume that the bond pays interest annually Round your answer to the nearest dollar. C.Even though interest rates did not change in a and b, why did the price of the bond change? The price of the bond with the lenger term is Select within a longer period of time. than the price of the bond with the shorter term as the investors will coifect the Select interest payments and receive the principal d Owge the interest rate in a and b to 5 percent ard rework your answers. Assame that the bond pan iterest annany. Round yor ammers to the narest denar. Price of the bond (ten years to maturay) Price of the bond (five years to maturity)! f Even though the interest rate is 5 percent in both calculations, why are the bond prices different? The pr e of the bond with the longer tem e than the pn e of the bond wen the shorter term as the investors wd colect the nterest payments eralon erpendoft e s Interest Factors for the Present Value of One Dollar Period (e.g. year) 18% 20% 24% 28% 9% 1 990 980 971 962 952 943 935 926 917 909 893 877 870 862 847 833 806 781 2 980 961 943 925 907 890 873 857 842826 797 769 756 743 718 694.650 .610 3 971 942 915 889 864 840 816 794 772 751 712 675 658 641 609 579 524 477 4 .961 924 .889 .855 .823 .792 .763 .735 .708 .683 .636 592 .572 .552 .516 .482 .423 .373 5 951 .906 863 .822 .784 .747 .713 .681 .650 .621 .567 .519 .497 .476 .437 .402 .341 .291 1% 2% 3% 4% 5% 6% 7% 8% 10% 12% 14% 15% 16% 6 942 888 838 790 746 705 666 630 596 564 507 456 432 410 370 335 275 227 7 933 .871 .813 .760 .711 .665 .623 583 .547 si3 .452 .400 .376 .3S4 314 279 222-178 8 923 853 789 731 677 627 582 540 .502 467 404 351 327 305 266 233 179 139 9 914 .837 766 .703 .645 .592 .544 .500 .460 .424 .361 .308 284 263 226 T94 144-108 10 905 .820 744 .676 .614 558 .508 463 .422 386 322 .270 247 .227 191 .162 .116 .085 11 .896 .804 .722 .650 585 ,527 .475 .429 .388 350 287 .237 215 195 162 13S .094 .066 12 .887 .788 701 .625 557 .497 .444 .397 .356 319 257 .208-187 .168 .137 .112 .076 .052 13 .879 .773 .681 .601 530 .469 .415 .368 326 290 229 182 .163 .145 .116-093 .061 .040 14 870 758 661 577 505 442 388 340 299 263 205 160 141 125 .099 078 049 032 15 .861 743 .642 .555 481 .417 .362 315 27S 239 .183 140 123 108 084 .065 .040 025 16 853 728 623 534 458394 339 292 252 218 163 123 107 093 071 054 032 019 17 844 .714 .605 .513 .436 .371 317 .270 231 .198 146 .108 .093 080 060 .045 .026 015 18 .836 700 587 .494 416 350 296 250 212 .180 .130 .095 .081 .069 051 .038 .021 012 19 828 686 570 475 396 331 276 232 194164 116 083 070 .060 043 031 017 009 20 820 .673 554 .456 .377 .312 .258 215 .178 149 104 ,073 061 .051 .037 .026 .014 .007 2 25 780 610 478 375 295 233 184 146 116 092 059 038 030 024 016 010 005 002 30 742 552 412 308 231 174 131 099 075 057 033 020 015 012 007 004 002 001 Interest Factors for the Present Value of an Annuity of One Dollar Period 16% 18% 14% 7% 10% 12% 3% 5% 6% 8% 9% 4% 1% 2% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.862 0.847 0.833 0.806 0.781 0.758 0.735 2 1970 1.942 1913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.605 1.566 1.528 1.457 1.392 1.332 1.276 3 2.941 2.884 2829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 2.246 2.174 2.106 1981 1.868 1.766 1674 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.798 2.690 2.589 2.404 2.241 2.096 1.966 5 4853 4.713 4580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.274 3.127 2.991 2.745 2.532 2.345 2.181 6 5.795 5.601 5.417 5.242 5.076 4.917 4.766 4.623 4.486 4.355 4.111 3.889 3.685 3.498 3.326 3.020 2.759 2.534 2.399 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4564 4.288 4.039 3.812 3.605 3.242 2.937 2.678 2455 8 7652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5535 5.335 4.968 4.639 4.344 4.078 3.837 3.421 3.076 2.786 2.540 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.985 5.759 5.328 4.946 4.607 4.303 4.031 3.566 3.184 2.868 2603 10 9.471 8.983 8.530 8.111 7.722 7.360 7024 6.710 6.418 6.145 5.650 5.216 4.833 4.494 4.193 3.682 3.269 2.930 2.650 11 10.368 9.787 9.253 8.760 8.306 7.887 7499 7.139 6.805 6.495 5.988 5.453 5.029 4656 4.327 3.776 3.335 2.978 2683 12 11.255 10.575 9.954 9.385 8.863 8.384 7943 7.536 7161 6.814 6.194 5.660 5.197 4793 4.439 3.851 3.387 3.013 2.708 13 12.134 11.348 10.635 9986 9.394 8.534 8.358 7904 7.487 7.103 6.424 5.842 5.342 4910 4.533 3.912 3.427 3.040 2.727 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 5.468 5.008 4.611 3.962 3.459 3.061 2.740 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.060 7606 6.811 6.142 5.575 5.092 4.675 4.001 3.483 3.076 2.750 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.312 7.824 6974 6.265 5.669 5.162 4.730 4.003 3.503 3.088 2.758 17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8544 8.002 7.120 6.373 5.749 5.222 4.775 4.059 3.518 3.097 2763 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.250 6.467 5.818 5.273 4.812 4.080 3.529 3.104 2.767 19 17226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 5.877 5.316 4.844 4.097 3.539 3.109 2.770 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.128 8.514 7.469 6.623 5.929 5.353 4.870 4.110 3.546 3.113 2.772 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 7843 6.873 6.097 5.467 4.948 4.147 3.564 3.122 2.776 30 25.808 22.937 19.600 17.292 15.373 13.765 12.409 11.258 10:274 9.427 8.055 7.003 6.177 5.517 4.979 4.160 3.569 3.124 2.778