Question

can someone please help (cant fit the tables in this post)

A. On December 31, 2018, when the market interest rate is 8%, Armstrong Corporation issues 260,000 of 5%, 8-year bonds payable. The bonds pay interest miannually. Determine the present value of the bonds at issuance. (Click the icon to view Present Value of $1 table) Click the icon to view Present Value of Ordinary Annuity of S1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) cart by calculating the present value of the principal. (Enter factor amounts to three decimal places, XXXX.) Value PV of principal Factor ter any number in the edit fields and then continue to the next question

Answer 1

Par value of bonds = $260,000

Stated interest rate = 5% annual or 2.5% semi annual

Bond life = 8 years

Market interest rate = 8% annual or 4% semi annual

Interest payment frequency = Semi annual

There are 16 semi annual interest payment periods.

Present value of principal = Value x Factor

= 260,000 x Present value factor (i%, n)

= 260,000 x Present value factor (4%, 16)

= 260,000 x 0.534

= $138,840

Present value of stated interest = (Value of bonds x Semi annual interest rate) x Factor

= (260,000 x 2.5%) x Present value annuity factor (i%, n)

= 6,500 x Present value annuity factor (4%, 16)

= 6,500 x 11.652

= $75,738

Present value of bonds payable = Present value of principal + Present value of stated interest

= $138,840 + $75,738

= $214,578

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