Self-Test Bonds SOLUTION

Self-Test Bonds SOLUTION - Self-Test - Selling Price of a...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Self-Test -- Selling Price of a Bond $180,000 A. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 10 periods @ 10% (effective annual rate) $180,000 6.14457 $1,106,022.60 Present Value of $2,000,000 Maturity Pmt. due in 10 periods @ 10% (effective annual rate) $2,000,000 0.38554 $771,080.00 Selling Price of the Bond $1,877,102.60 B. Selling Price of the Bond if C. Selling Price of the Bond if Payment Amt. Table Factor Present Value for 10 periods @ 8% (effective annual rate) $180,000 6.71008 $1,207,814.40 Present Value of $2,000,000 Maturity Pmt. due in 10 periods @ 8% (effective annual rate) $2,000,000 0.46319 $926,380.00 Selling Price of the Bond $2,134,194.40 Annual Cash Interest Payments: $2,000,000 x 9% (stated annual rate) = Effective Annual Interest Rate = 10% Present Value of $180,000 Interest Pmts. sold at a discount ( effective rate > stated rate ) Effective Annual Interest Rate = 9% No calculations required -- Effective Interest Rate = Stated Interest Rate
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/20/2011 for the course ACC 221 taught by Professor Wiegand during the Spring '08 term at Miami University.

Page1 / 3

Self-Test Bonds SOLUTION - Self-Test - Selling Price of a...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online