Excel Applications for Accounting Principles 4th Edition by Gaylord Smith

Exercise 4

CHART ANALYSIS
a. Reset the Data Section to its initial values. The price of this bond is $1,407,831. What would it be if there were only 9 or 8 years to maturity Use the worksheet to compute the bond issue prices and enter them in the spaces provided.
Bond issue price (9 years to maturity) $__________________
Bond issue price (8 years to maturity) $ __________________
b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity.
c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%.
When the assignment is complete, close the file without saving it again.