BDEF H I KLMN O Y. Chapter 11, E13B 1. Current market value of the bonds calculated Present value of 20 periodic payments at 4% (8% 2) (from Table 2*): Present value of a single payment at the end of 20 periods with interest compounded semiannually at 4% (8% + 2) (from Table 1*): х Issue price (total present value) of bond issue From the appendix on present value tables. ** х 2. Gain or loss determined Face value Cash paid (Gain or Loss?)
BDEF H I KLMN O Y. Chapter 11, E13B 1. Current market value of the bonds calculated Present value of 20 periodic payments at 4% (8% 2) (from Table 2*): Present value of a single payment at the end of 20 periods with interest compounded semiannually at 4% (8% + 2) (from Table 1*): х Issue price (total present value) of bond issue From the appendix on present value tables. ** х 2. Gain or loss determined Face value Cash paid (Gain or Loss?)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Time Value of Money and Early Extinguishment of Debt
E13B. Infosphere, Inc., has a $350,000, 4 percent bond issue that was issued a number of years ago at face value. There are now 10 years left on the bond issue, and the
market interest rate is 8 percent. Interest is paid semiannually. The company purchases
the bonds on the open market at the calculated current market value and retires the
bonds.
1. Using present value tables, calculate the current market
2. Is there a gain or loss on retirement of the bonds, and if so, how much is it?
Transcribed Image Text:BDEF
H I
KLMN O
Y.
Chapter 11, E13B
1. Current market value of the bonds calculated
Present value of 20 periodic payments at 4% (8% 2)
(from Table 2*):
Present value of a single payment at the end of 20 periods
with interest compounded semiannually at 4% (8% + 2)
(from Table 1*):
х
Issue price (total present value) of bond issue
From the appendix on present value tables.
**
х
2. Gain or loss determined
Face value
Cash paid
(Gain or Loss?)
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