Bonds - Lecture Week 12 Bonds Kenny Zheng AIM 2301...

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Unformatted text preview: Lecture Week 12 Bonds Kenny Zheng AIM 2301 Financial Accounting Lecture Outline • Noncurrent Liabilities- Present Value Concept- Bonds 1 Long-Term Liability • Valuation Rule: Present value of future payments • Future value $ 1 0 0 + $ 1 0 + $ 1 1 Y e a r 1 Y e a r 2 $ 1 0 0 + $ 1 0 $ 1 0 0 @ 1 0 % p e r a n n u m c o m p o u n d e d a n n u a l l y • Computing present value of a single future payment using Exhibit 9A.5 (p.497) of the textbook PV of $1 (n=2, i=10%) = 0.8264 PV of $121 = 0.8264 x 121 = $100 P V o f $ 1 2 1 = $ 1 0 0 ( 1 0 % c o m p o u n d e d a n n u a l ly ) $ 1 2 1 Y e a r 1 Y e a r 2 Liability reported on B/S • Present value 2 Long-Term Liability • Valuation Rule: Present value of future payments (cont.) • Present value of annuity • Computing present value of an annuity using Exhibit 9A.6 (p. 498) of the textbook PV of $1 annuity (n=2, i=10% compounded annually) = 1. 7355 PV of $100 annuity= 1. 7355 x 100 = $173.55 • Effect of compounding period Y e a r 1 Y e a r 2...
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This note was uploaded on 11/24/2009 for the course BA 2301 taught by Professor Mattpolze during the Fall '08 term at University of Texas at Dallas, Richardson.

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Bonds - Lecture Week 12 Bonds Kenny Zheng AIM 2301...

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