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Dear Tutor,
would you please help me this question?
5% 100,000 fixed rate 5 year Receivable loan. (Current variable rates 5%). Market interest rates then increase to 6%, so that the fair value of the fixed rate bond has decreased to $96,535.
I had tried to calculate its fare value like these: Present annuity factor for 5 years 6% 4.2124 x 5000=21061.82; Present value factor 0.7473 x 100,000=74730, totally should be 95791.82.
Why it is 96535?
Many thanks
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