Present Value of Bonds Payable; Premium Moss Co. issued $700,000 of five-year, 1

Question

Present Value of Bonds Payable; Premium

Moss Co. issued $700,000 of five-year, 13% 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 8 and Exhibit 10. Round to the nearest dollar.

EXHIBIT 10 Present Value of an Annuity of $1 at Compound Interest Periods 41496 5% 5½% 6% 6,496 7% 10% 11% 12% 13% 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458 0.90909 0.90090 0.89286 0.88496 1.88609 1.87267 1.85941 1.84632 183339 1.82063 1.80802 1.73554 .71 252 :6500 ,6681 3 2.77509 2.74896 2.72325 2.69793 2.6730 2.64848 262432 2.48685 2.44371 2.40183 2.36115 3.62990 3.58753 3.54595 3.50515 346511 3.42580 3.38721 3.16987 3.10245 3.03735 2.97447 5 4.45182 4.38998 432948 4.27028 421236 4.15568 4.10020 3.79079 3.69590 3.60478 351723 6 5.24214 5.15787 5.07569 4.99553 4.91732 4.84101 4.76654 435526 4.23054 411 3.99755 6.00205 5.89270 5.78637 5.68297 5.58238 5.48452 5.38929 486842 4.71220 4.56376 442261 8 6.73274 6.59589 6.46321 6.33457 6.20979 6.08875 5.97130 533493 5.14612 4.96764 4.79677 9 743533 7.26879 7.10782 6.95220 6.80169 6.65610 6.51523 5.75902 553705 5.32825 5.13166 8.11090 7.91272 7.72173 7.53763 7.36009 7.18883 7.02358 6.14457 5.88923 5.65022 5.42624 4% 4

Explanation / Answer

$752,763.38

Therefore the present value of the bond is 752763.38

FV 700000 rate (11%/2) 5.50% PMT (700000*13%*1/2) 45500 NPER 5*2 10 PV(5.5%,10,45500,700000)

$752,763.38

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