Question

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

Answer 1

$326,710.93

Step-by-step 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