Present value of bonds payable: Bond payable has two types of payments, for the principal and for the interest. To calculate the present value of bonds, the present value of future principal payments and present value of future interest payment are added together. Following formula are used to calculate present value of bonds: Present value of interest payments = Interest payment × present value of $1 annuity Present value of Principal payment = Principal payment × present value of $1 1. Present value of bonds using 14% market interest rate: To determine: The present value of bonds payable
Present value of bonds payable: Bond payable has two types of payments, for the principal and for the interest. To calculate the present value of bonds, the present value of future principal payments and present value of future interest payment are added together. Following formula are used to calculate present value of bonds: Present value of interest payments = Interest payment × present value of $1 annuity Present value of Principal payment = Principal payment × present value of $1 1. Present value of bonds using 14% market interest rate: To determine: The present value of bonds payable
Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.
Chapter 14, Problem E14A.30E
To determine
Present value of bonds payable:
Bond payable has two types of payments, for the principal and for the interest. To calculate the present value of bonds, the present value of future principal payments and present value of future interest payment are added together. Following formula are used to calculate present value of bonds:
1. Present value of bonds using 14% market interest rate:
To determine:
The present value of bonds payable
To determine
2. Present value of bonds using 16% market interest rate:
To determine:
The present value of bonds payable
To determine
3. Present value of bonds using 12% market interest rate:
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