Calculating the value of bonds when stated rate and market rate are different [40-50 min]
Interest rates determine the present value of future amounts.
Requirementsw
1. Determine the present value of seven-year bonds payable with maturity value of $83,000 and stated interest rate of 12%, paid semiannually. The market rate of interest is 12% at issuance.
2. Same bonds payable as in Requirement 1, but the market interest rate is 14%.
3. Same bonds payable as in Requirement 1, but the market interest rate is 10%.
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