entries on the income statement?
Part Two
1. Bond Valuation IBM 8s 40 FA
\(V = ?\), F = $1,000, CR (coupon rate) = 8\%, m = 2 (semiannual), and \(i_d\) (discount
rate) = 10\% (rrr).
P = PV (CF) = PV (Int, F) = PV (ann) + PV (Is) = PMT (PVIFA) + F (PVIF)
VALUE = Price \implies solve for the price you are willing to pay with a 10\%
required return.
2. Internal Rate of Return IBM 10s 30 JJ
$1,297.55 = INT (PVIFA) + F (PVIF) = $1,152.47 = INT (PVIFA) + Face (PVIF)
wherein err = irr to make the equation true
\(err: \$1,297.55 = (INT/2) \left[ \left( 1 - \frac{1}{(1 + irr/2)^{2n}} \right) / (irr/2) \right] + F \left( \frac{1}{(1 + (irr/2))^{2n}} \right)\)
Using the price as $1,297.55 = V_B, calculate the Internal Rate of Return for the
investment.
