Question

Present Value of Bonds Payable; Premium

Moss Co. issued $105,000 of four-year, 12% bonds, with interest payable semiannually, at a market (effective) interest rate of 11%.

Present Value of Bonds Payable; Premium Moss Co. issued $105,000 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 Note: Round final answer to the nearest dollar

Answer 1

Solution:

Computation of Bond Price
Table values are based on:
n=	8
i=	5.50%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.65160	$105,000	$68,418
Interest (Annuity)	6.33457	$6,300	$39,908
Price of bonds			$108,326