Question

Moss Co. issued $360,000 of four-year, 12% 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

Bond Valuation
Bond face value	360,000
Bond interest rate	12%
Semi annual interest at =360,000*12%*6/12	21,600
Market interest rate (yield rate)	11%
Bond tenure	4
Interest payments	Semi annually

Table values are based on
n(4*2)	8
1(11%/2)	5.5%

Cash flows	Table value	Amount	Present value
Par(Maturity)value	0.65160	360,000	234,576
Interest(annuity)	6.33457	21,600	136,827

Present value of the bonda payable                                                                             371,403

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