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Green Leaf Corp. sells $300,000 of bonds to private investors. The bonds mature in five years, have a 6% coupon rate, and interest is paid semiannually. The bonds were sold to yield 4% (i.e., the discount rate or the required rate of return is 4%). What proceeds does Green Leaf receive from investors

Respuesta :

Answer:

$326,710.93  

Explanation:

The approaches I have chosen in determining the current bond price are a financial calculator and excel formula approaches as shown thus:

Financial calculator:

N=5( number of annual coupons in 5 years left to maturity)

I/Y=4( the yield on the bond)

PMT=18000 (annual coupon=face value*coupon rate=$300,000*6%)

FV=300000( face   value which is $300,000)

CPT PV=-$326,710.93  

Excel PV function:

=-pv(rate,nper,pmt,fv)

=-pv(4%,5,18000,300000)=$326,710.93  

 

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