Practice Problems - Chapters 10 & 11 with Solutions_1

Practice Problems - Chapters 10 & 11 with...

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If market rate is at 9.00% Furture Payment * PV Factor = PV Annuity 60,000 6.41766 385,059 Single Payment 1,000,000 0.42241 422,411 Total Present Value 807,470 (BV * Eff. Int. Rate) (Par Value * Stated Int. Rate) Beginning BV Interest Exp Cash Disc. Amort. Ending BV Pd 1 807,470 72,672 60,000 12,672 820,143 The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest a. Minus the present value of all future interest payments at the market (effective) rate of interest. b. Minus the present value of all future interest payments at the rate of interest stated on the bond. c. Plus the present value of all future interest payments at the market (effective) rate of interest. d. Plus the present value of all future interest payments at the rate of interest stated on the bond. The following information pertains to Camp Corp.’s issuance of bonds on July 1, 2009: Par Amount $1,000,000 Term 10 years Coupon rate 6% Interest payment dates annually on July 1 Market Rate when issued 9% What should the issue price be for the bonds? What is the journal entry to record the issuance? Cash
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This note was uploaded on 12/17/2010 for the course ACC 311 taught by Professor Charrier during the Fall '08 term at University of Texas.

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Practice Problems - Chapters 10 & 11 with...

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