please help and is their a way to calculate by hand The notes to the Helping Ltd
ID: 2522998 • Letter: P
Question
please help and is their a way to calculate by hand
The notes to the Helping Ltd. financial statements reported the following data on December 31, Year 1 (end of the fiscal year) EB (Click the icon to view the financial statement data) Helping Ltd. amortizes bond discount by the effective -interest method and pays all nterest amounts at December 31. Read the requirements year, the date of ance of the bonds is 6% Answer the following ques tions ebout Heping Lids ent 1 Assume the market interest rate on January 1 o Requirem long-term liabilities: (Round your answers to the nearest whole dollar.) a. Using the PV function in Excel, what is the issue price of the bonds? The issue price of the bonds is $ Data TableExplanation / Answer
Since the market interest rate of 6% is higher than the bond interest rate of 3%, the bond is being priced at a discount, so that investors can buy it and still achieve the 6% market rate.
The present value of bonds will be equal to:
Present Value of Face Value(Using bond interest rate) + Present value of Interest Payments (Using market interest rate)
= (5,300,000 x PV factor of 3% for 8 years) + (Interest Amount x Annuity Factor using the 6% market rate for 8 years)
= (5,300,000 x 0.7894) + (5,300,000 x 3% x 6.2098)
= 5,171,184
Thus the issue price of the bonds will be $5,171,184.
The discount amount will be equal to $5,300,000 - $5,171,184 = $1,28,816
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.