Question

12A. On December 31, 2018, when the market interest rate is 10%, Gilbert Corporation issues $200,000 of 6%, 4-year bonds payable. The bonds pay interest semiannually. Determine the present value of the bonds at issuance. E(Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Start by calculating the present value of the principal. (Enter factor amounts to three decimal places, X.XXX.) PV of principal Value Factor х $ 200,000 0.677 135,400 х Now calculate the present value of the stated interest. (Enter factor amounts to three decimal places, X.XXX.) Semiannual interest rate x Value Factor PV of stated interest х 200000 3 % ) x х =

Answer 1

Market interest Rate = 10% Life of the Bond = 4 Years For Semiannaal Paymnet = Periods = 4*2 =8 Interest rate = 10%/2 = 5% Value * Factor (i=5%,n=8) = Pv of Principle 200000 * 0.677 = 135400 Market interest Rate = 10% Life of the Bond = 4 Years For Semiannaal Paymnet = Periods = 4*2 =8 Interest rate = 10%/2 = 5% Semiannual Factor(PVA, Value interest Rate i=5%, n=8) 200000 3% 6.463 PV of Stated Interest 38778