7252569-MIdterm-1 (dragged) 31

# 7252569-MIdterm-1 (dragged) 31 - 29,842 Selling price of...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 14-15 ILLUSTRATION 14-1 INTEREST RATES AND BOND PRICES Market Interest Bonds Sold Rate At Bond (1) 10% Premium Stated Issued Interest Rate (2) 12% Face Value 12% (3) 15% Discount EXAMPLE: Three-year bonds are issued at face value of \$100.000 and a stated rate of interest of 12 %. (1) Bonds are issued to yield 10%. Present value of principal = \$100,000 x (PVIF 10%, 3yrs ) = \$100,000 x .75132 = \$75,132 Present value of interest payments = \$12,000 x (PVIFA 10%,3yrs ) \$12,000 x 2.48685
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Unformatted text preview: 29,842 Selling price of bonds (premium) \$104.974 (2) Bonds are issued to yield 12%. Present value of principal = \$100,000 x (PVIF 12%, 3yrs ) = \$100,000 x .71178 = \$71,178 Present value of interest payments = \$12,000 x (PVIFA 12%,3yrs ) \$12,000 x 2.40183 = 28,822 Selling price of bonds (par) \$100.000 (3) Bonds are issued to yield 15%. Present value of principal = \$100,000 x (PVIF 15%, 3yrs ) = \$100,000 x .65752 \$65,752 Present value of interest payments = \$12,000 x (PVIFA 15%,3yrs ) \$12,000 x 2.28323 = 27,399 Selling price of bonds (discount) \$93,151...
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