Discussion Board5026118204 R Cengage o Search a Position Pa

Discussion Board-5026.118204 - R Cengage o% Search a Position Paper (effective) interest rate of 9%. Determine the value of the bonds payable. using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollan. amount and the peniodic interest. ng

Solution

Facts of the question:

Amount-$25000000

Maturity- 5 years or 5*2=10 periods

Interest = 7% annually = 3.5% Semi annually

Required rate = 9% annually = 4.5% semi annually

Interest payable = semi annually

Period

Event

Cash flow

Present Value Factor @ 4.5%

Discounted Cash flow

1-10

Interest

875000

7.91272

875000*7.91272

6923630

10

Redemption

25000000

0.64393

25000000*0.64393

16098250

23021880

Present Value of bond payable = $ 23021880

Period	Event	Cash flow	Present Value Factor @ 4.5%		Discounted Cash flow
1-10	Interest	875000	7.91272	875000*7.91272	6923630
10	Redemption	25000000	0.64393	25000000*0.64393	16098250
					23021880