On January 1, 2017, Waterway Industries issued eight-year bonds with a face value of $6700000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are:
On January 1, 2017, Waterway Industries issued eight-year bonds
with a face value of $6700000 and a stated interest rate of 6%,
payable semiannually on June 30 and December 31. The bonds were
sold to yield 8%. Table values are:
Present value of 1 for 8 periods at 6% | 0.627 | ||
Present value of 1 for 8 periods at 8% | 0.540 | ||
Present value of 1 for 16 periods at 3% | 0.623 | ||
Present value of 1 for 16 periods at 4% | 0.534 | ||
Present value of annuity for 8 periods at 6% | 6.210 | ||
Present value of annuity for 8 periods at 8% | 5.747 | ||
Present value of annuity for 16 periods at 3% | 12.561 | ||
Present value of annuity for 16 periods at 4% | 11.652 |
The present value of the interest is
The present value of the interest
The present value of the interest = Semi-annual coupon amounts x Present Value annuity factor at 4.00% for 16 Years
= [$6,700,000 x 6.00% x ½] x Present value of annuity for 16 periods at 4%
= $201,000 x 11.652
= $2,342,052
“Hence, the present value of the interest payment will be $2,342,052”
On January 1, 2017, Waterway Industries issued eight-year bonds with a face value of $6700000 and...
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