Exhibit 14-8
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Exclusive Industries has debentures outstanding (par value $1,000.00) convertible into exclusive's common stock at $30. The coupon rate is 11% payable semiannually and they mature in 10 years.
-Refer to Exhibit 14-8. Calculate the straight-bond value assuming that bonds of equivalent risk and maturity are yielding 13% per year compounded semiannually.
A) $942.65
B) $902.65
C) $889.82
D) $796.83
E) $757.37

Question

Quizplus · Accepted Answer

P = 55(PVIFA?.?%,??) + 1000(PVIF?.?%,??)
P = 55 (11.0185) + 1000 (.2838) = $889.82
where 11.0185 is the present value of annuity factor and .2838 is the present value factor both calculated for 20 periods at an interest rate of 6.5% per period.

Exhibit 14-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)