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Moss Co. issued $100,000 of five-year, 11% bonds with interest payable semiannually, at a market (effective) interest rate of 8%. Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10.

Note: Round to the nearest dollar.

Respuesta :

The present value of the bond payable is $120,130.

What is the present value?

The present value of the bond is the sum of the the bonds discounted cash flows.

Present value can be calculated using a financial calculator:

  • Cash flow each year from period 1 to 10 : 11% x 100,000 = 11,000
  • Cash flow in period 20 : 100,000
  • Interest rate = 8%

Present value = $120,130.24

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