Homework SourseMoss Co issued 900000 of tenyear 12 bonds with interest paya
Moss Co. issued $900,000 of ten-year, 12% bonds with interest payable semiannually, at a market (effective) interest rate of 10%.
Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10. Round to the nearest dollar.
EXHIBIT 10 Present Value of an Annuity of $1 at Compound Interest Periods 4% 4w% 5% sw% 6% 6.5% 7% 10% 11% 12% 13% 1 0961 S4 095694 a95238 094787 094340 0.93897 093458 090909 oscon oes286 ossss 2 1.88609 187267 1.85941184632 183339 1.82063 180802 173554 1.712521.6900516810 2.77509 2.748962.72325 2.69793 267301 264848 262432 24685 244371 2.401832.36115 4 3.62990 3.58753 354595350515 346511 42580 3.38721 3,16987 3.10245 3.03735 2.97447 4A5182 4.38998 432948 4.27028 421236 415568 410020 3.79079 3.69590 3.60478 351723 6 5.24214 5.15787 507569 4.99553 491732 4.84101476654 4.35526 423054 4.111413.99755 600205 89270 5.786375.68297 S58238 548452 538929 486842 471220 4.56376 44226 8 673274 9589 646321 633457 620979 60887S 597130 533493 5.14612 496764 479677 7A3533 7.26879 7.10782 6.95220 680169665610 651523 575902 5537OS 532825 5.13166 8.11090 7.91272 7.72173 7.53763 736009 7.18883 7.02358 614457 5.88923 5.65022 42624 Solution
Present value of bond=Present value of semi-annual interest payments+Present value of bond repayment at the end Interest payment per semi-annually=900000*12%*1/2=$54000 Market interest rate per semi-annually=10%*1/2=5% Present value of semi-annual interest payments @5% for 20 (10 years*2) periods=54000*12.46221=672959 Present value of bond repayment at the end of 20th period @5%=900000*0.376889=339200 Present value of bond=672959+339200=$ 1012159 (Here,Exhibit shows present values unitil 10th priod.We need till 20th period)
