FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter AG, Problem G.13BE
To determine
Present Value: The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:
To Determine: The present
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
2. DEF Company will issue $8,000,000 in 10%, 10-year bonds when the market
rate of interest is 7%. Interest is paid semiannually.
Required:
a. Will this interest structure result in a Premium for DEF company or a Discount?
b. How much cash will be received from the issuance of the bond?
c. How much will the semi-annual interest payment be on the bond?
Cullumber Railroad Co. is about to issue $296,000 of 6-year bonds paying an 11% interest rate, with interest payable annually. The discount rate for such securities is 12%.Click here to view the factor table.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)In this case, how much can Cullumber expect to receive from the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,525.)
Cullumber can expect to receive
$enter a dollar amount rounded to 0 decimal places
The Latham Corporation is planning on issuing bonds that pay no interest but can be converted into $1,000 at maturity, 7 years from their purchase. To price these bonds competitively with other bonds of equal risk, it is determined that they should yield 6 percent, compounded annually. At what price should the Latham Corporation sell these bonds?
Chapter AG Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Blossom Railroad Co is about to issue $318,000 of 10 year bonds paying an 12% interest rate with interest payable annually. The discount rate for such securities is 8%. How much can Blossom expect to receive for the sale of these bonds?arrow_forwardOn January 1, 2024, Tableau Company issues $20 million of 9% bonds, due in six years, with interest payable semiannually on June 30 and December 31 each year. Use a financial calculator or Excel. Required: 1. If the market rate is 8%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. 2. If the market rate is 9%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. 3. If the market rate is 10%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. Help Save & (Do not round intermediate calculations. Round final answer to the nearest dollar amount. Enter your answer in dollars, not in millions.) 1. The bonds issue at 2. The bonds issue at 3. The bonds issue at and the issue price is and the issue price is and the issue price isarrow_forwardMcAllen Corporation is issuing a $20,000,000 20-year bond with a stated interest rate of 10%. This bond pays interest semiannually every June 30 and December 31. Assume that the market rate of interest is 12%. What would be the issue price of this bond?arrow_forward
- Abbott, Inc., plans to issue $500,000 of ten percent bonds that will pay interest semiannually and mature in five years. Assume that the effective interest rate is 12 percent per year compounded semiannually. How would I Calculate the selling price of the bonds.arrow_forwardBayside Inc. sells $5,000,000 of five-year, 10% bonds at the start of the year. The bonds pay interest yearly and have an effective yield of 9%. At what amount would the bonds sell for? What would be the bond carrying value at the end of Year 1? What amount of bond premium would be amortized for Year 2?arrow_forwardFitzgerald's 15-year bonds pay 6 percent interest annually on a $1,000 par value. If the bonds sell at $875, what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference.arrow_forward
- Tony's Pizzeria plans to issue bonds with a par value of $1,000 and 10 years to maturity. These bonds will pay $45 interest every 6 months. Current market conditions are such that the bonds will be sold to net $937.79. What is the YTM of the issue that a broker would quote to an investor?arrow_forwardA $1,000 face value bond issued by the Purdue Company currently pays total annual interest of $80 per year and has a 15-year life. a-What is the present value, or worth, of this bond if investors are willing to accept a 10 percent annual rate of return on bonds of similar quality bond? b. How would your answer change is the bond makes semi-annual payments? c-How would your answer in (a) change if, one year from now, investors only required a 6 percent annual rate of return on bond investments similar in quality to the Purdue bond? d-Suppose the original bond can be purchased for $925. What is the bond’s yield to maturity?arrow_forwardSunland Company is about to issue $464,000 of 10-year bonds paying an 11% interest rate, with interest payable annually. The discount rate for such securities is 10%. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) How much can Sunland expect to receive for the sale of these bonds? (Round answer to O decimal places, e.g. 2,575.) Sunland can expect to receive $ Barbara Jones made an investment of $7,606.08. From this investment, she will receive $1,000 annually for the next 15 years starting one year from now. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What rate of interest will Barbara's investment be earning for her? (Hint: Use Table 4.) (Round answer to 0 decimal places, e.g. 25%.) Rate of interest %arrow_forward
- SMC will be issuing bonds with a face value of P100,000 through an underwriter. The underwriter will be issuing the bonds at 106 but will charge 7% on face amount. The bonds will be irredeemable and will pay 8% annually. If the tax rate is 25%, what is the effective cost of the bonds?arrow_forwardMetlock Inc. issues $4,200,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 12%. What amount will Metlock receive when it issues the bonds?arrow_forwardPetron needs to raise $50,000 for capital expansion of its plant. The company issues ten year bonds to raise the money. The bonds are redeemable at 102. The rate of interest on the bond, r, is 3.43% payable quarterly. If at the time of the bond issue interest rates, i, are 2.31% compounded quarterly, what amount of money will the company received from the bond issue? *arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Bond Valuation - A Quick Review; Author: Pat Obi;https://www.youtube.com/watch?v=xDWTPmqcWW4;License: Standard Youtube License