Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q30E_3

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 662

Short Answer

Determining the present value of bonds payable

Interest rates determine the present value of future amounts. (Round to the nearest

dollar.)

Requirements

1. Determine the present value of 10-year bonds payable with face value of $86,000

and stated interest rate of 14%, paid semiannually. The market rate of interest is

14% 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

See the step by step solution

Step by Step Solution

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

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.