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Q30E_3

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Found in: Page 662

### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# Determining the present value of bonds payableInterest rates determine the present value of future amounts. (Round to the nearestdollar.)Requirements1. Determine the present value of 10-year bonds payable with face value of $86,000and stated interest rate of 14%, paid semiannually. The market rate of interest is14% at issuance.2. Same bonds payable as in Requirement 1, but the market interest rate is 16%.3. Same bonds payable as in Requirement 1, but the market interest rate is 12%. The present value of the bonds is$77,557

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## Step 1: Definition of interest rate

A interest rate is the rate at which company pays the sum of money to the bondholder for using the money provided by them.

## Step 2: Calculation of the present value of bonds

In this, we take n= 20 and i=7%

Present value of interest:

Present Value of bonds

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