A company issues a $100,000 bond due in 4 years paying 7 percent interest annually at year- end. Assume that the market rate for similar bonds is 11 percent. How you will calculate the present value of bond?

A company issues a $100,000 bond due in 4 years paying 7 percent interest annually at year- end. Assume that the market rate for similar bonds is 11 percent. How you will calculate the present value of bond?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5MC: On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000...

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Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

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