Ch.+10+Problem+Solutions

Ch.+10+Problem+Solutions - Problem 10-1B (50 minutes) Part...

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Problem 10-1B (50 minutes) Part 1 a. Cash Flow Table Table Value* Amount Present Value Par value . ................ B.1 0.9235 $35,000 $32,323 Interest (annuity) . ... B.3 7.6517 700** 5,356 Price of bonds . ....... $37,679 Bond Premium . ....... $ 2,679 **$35,000 x 0.04 x ½ = $700 * Table values are based on a discount rate of 1% (half the annual market rate) and 8 periods (semiannual payments). b. 2009 Jan. 1 Cash . ............................................................. 37,679 Premium on Bonds Payable . ................ 2,679 Bonds Payable . ...................................... 35,000 Sold bonds on stated issue date. Part 2 a. Cash Flow Table Table Value* Amount Present Value Par value . ................ B.1 0.8535 $35,000 $29,873 Interest (annuity) . ... B.3 7.3255 700 5,128 Price of bonds . ....... $35,001** * Table values are based on a discount rate of 2% (half the annual market rate) and 8 periods (semiannual payments). (Note: When the contract rate and market rate are the same, the bonds sell at par and there is no discount or premium.) **Difference due to rounding
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This note was uploaded on 01/22/2011 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

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Ch.+10+Problem+Solutions - Problem 10-1B (50 minutes) Part...

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