Yahoo Answers is shutting down on May 4th, 2021 (Eastern Time) and beginning April 20th, 2021 (Eastern Time) the Yahoo Answers website will be in read-only mode. There will be no changes to other Yahoo properties or services, or your Yahoo account. You can find more information about the Yahoo Answers shutdown and how to download your data on this help page.
Trending News
Accounting Help: Present Value of Bonds Payable; Premium?
Mason Co. issued $450,000 of four-year, 12% bonds with interest payable semiannually, at a market (effective) interest rate of 10%.
Determine the present value of the bonds payable (using the present value tables), round to the nearest dollar.
1 Answer
- SandyLv 78 years agoFavorite Answer
To calculate the Price of the bond, we’ll use the following symbols:
(pv1,i,n) = present value of $1 discounted at i%, n periods from the present
(pva,i,n) = present value of an annuity of $1 discounted at i%, for n periods
Since interest is payable semiannually, there are 8 interest periods (4 yrs x 2), and the market interest rate in the formula is 5%, and the stated interest rate is 6%
The price of the bond is $450,000(pv1, 5%, 8) + 6%($450,000)(pva, 5%, 8)
Using the npv tables attached, this
= $450,000(0.67684) + 6%($450,000) (6.46321)
= $304,578 + $174,507
= $479,085
Answers may be off by a dollar or two, depending on the number of decimal places you use in the formula
Source(s): http://highered.mcgraw-hill.com/sites/dl/free/0072... http://highered.mcgraw-hill.com/sites/dl/free/0072...
