Question

Exhibit 5 Present Value of $1 at Compound Interest Periods Ova AWN 4% 472% 0.96154 0.956940 0.92456 0.915730 0.88900 0.876300 0.85480 0.838560 0.82193 0.802450 0.79031 0.767900 0.75992 0.734830 0.73069 0.703190 0.702590.672900 0.67556 0.643930 5% 0.95238 0.90703 0.86384 0.82270 0.78353 0.74622 0.71068 0.67684 0.64461 0.61391 57% 0.94787 0.89845 0.85161 0.80722 0.76513 0.72525 0.68744 0.65160 0.61763 0.58543 6% 0.94340 0.89000 0.83962 0.79209 0.74726 0.70496 0.66506 0.62741 0.59190 0.55839 672% 0.93897 0.88166 0.82785 0.77732 0.72988 0.68533 0.64351 0.60423 0.56735 0.53273 7% 0.93458 0.87344 0.81630 0.76290 0.71299 0.66634 0.62275 0.58201 0.54393 0.50835 10% 11% 0.909090.90090 0.82645 0.81162 0.75131 0.73119 0.68301 0.65873 0.62092 0.59345 0.56447 0.53464 0.51316 0.48166 0.46651 0.43393 0.42410 0.39092 0.38554 0.35218 12% 13% 0.89286 0.88496 0.797190.78315 0.71178 0.69305 0.63552 0.61332 0.56743 0.54276 0.50663 0.48032 0.45235 0.42506 0.40388 0.37616 0.36061 0.33288 0.32197 0.29459
Moss Co. issued $150,000 of five-year, 13% bonds, with interest payable semiannually, at a market (effective) interest rate of 11%. Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar.

Answer 1

	Amount	PV factor 5.5%	Present value
Semi-annual interest	9750	7.53763	73492
Principal	150000	0.58543	87815
Total			161306
Present value of Bonds payable	161306	or 161307
Workings:
Semi-annual interest	9750	=150000*13%/2
PV factor interest	5.50%	=11%/2
PV factor 5.5%:
Semi-annual interest	7.53763	=(1-(1.055)^-10)/0.055
Principal	0.58543	=1/1.055^10