Answer Happy

For purposes of this exercise, certain assumptions are being made. Assume that your selected company issued a new 10-year bond for $300,000 on October 1, 2021, that will mature on October 1, 2031. The future value of this bond is therefore $300,000. The bond was issued at the current market rate of 5.0% fixed for 10 years, with interest payments made semi-annually. What is the present value of this bond using the three scenarios in Part II: Bond Issuance?
0 1 2 4 s 6 7 10 1 2 7 Newly issued 10-year bon Calculate the present value in the four scenarios below. 1. The present value of the bond at issuance Present Value PV Periods N I 0 1 2 Interest Payments PMT Future Value FV Present Value PV Periods N Interest I Payments PMT Future Value FV 2. The present value of the bond if overall rates in the market increased by 2% annually Present Value PV Periods N I Interest Payments PMT Future Value FV $300,000 3. The present value of the bond if overall rates in the market decreased by 2% annually + s Present Value PV Periods N I 20 Number of semi-annual payments made over 10 (10 X 2) 2.50% Annual interest rate at issuance paid semi-annually 2,500 This bond makes regular semi-annual payments of interest (in dollars) $100,000 Future value in 10 years enter as a positive number (Always the Future or Face Value of the Bondi = Debt. Interest Payments PMT Future Value FV ($186,301) 19 10 1 4. The present value of the bond if overall rates in the market remained the same as at issuance $300,000.00 For purpose of thi company issued a ne October 1, 2031. The the current marketra What's the present ($265,663) NOTE: A simple rule change, except you the bondssuance 20 Number of semi-annual payments made over 10 (10 X 2) 3.50% New annual market interest rate paid semi-annually (New Annual Rate divided by 2) 2500 This bond makes regular semi-annual payments of interest (in dollars) (Dollars Paid Annually To calculate PV, $300,000 Future value in 10 years enter as a positive number (Always the Future or Face Value of the provided. Link i the same, periods re marketrate, the pre For the purpose of Initial bonded https://www.arac Once you have c 20 Number of semi-annual payments made over 10 (10 X 2) 1.50% New annual market interest rate paid semi-annually (New Annual Rate divided by 2) 2500 This bond makes regular semi-annual payments of interest (in dollars) (Dollars Paid Annually divided by 2) $300,000 Future value in 10 years- enter as a positive number (Always the Future or Face Value of the Bond) 20 Number of semi-annual payments made over 10 (10 X 2) 0% Annual market interest rate remains the same as Question 1,paid semi-annually (Annual Rate divided by 2) 2,500 This bond makes regular semi-annual payments of interest (in dollars) (Dollars Paid Annually divided by 2) $ 300,000 Future value in 10 years-enter as a positive number (Always the Future or Face Value of the Bond) $
PART II: BOND ISSUANCE Bonds are a long-term debt for corporations. By buying a bond, the bond-purchaser lends money to the corporation. The borrower promises to pay a specified interest rate during the bond's lifetime and at maturity, payback the entire future value of the bond. In case of bankruptcy, bondholders have priority over stockholders for any payment distributions. For purposes of this exercise, certain assumptions are being made. Assume that your selected company issued a new 10-year bond for $300,000 on October 1, 2021, that will mature on October 1, 2031. The future value of this bond is therefore $300,000. The bond was issued at the current market rate of 5.0% fixed for 10 years, with interest payments made semi-annually. What is the present value of this bond using the three scenarios in Part II: Bond Issuance? Bonds Debt... = ..Bondholders = Lenders NOTE: A simple rule to follow. When market rates change, nothing in the original bond's terms change, except you will enter the new market interest rate in place of the interest rate stated at the bond's issuance date. In other words, the future value remains the same, payments remain the same, periods remain the same. When you change the interest rate to reflect the new market rate, the present value of the bond will either increase or decrease. For the purposes of this exercise, assume that the new market rates occur one (1) day after the initial bond is issued. y To calculate PV, you can use the Excel formula or the financial calculator E provided. Link is provided below. https://www.arachnoid.com/finance Once you have completed these calculations, proceed to write your written analysis.