### E12A-30 Determining the Present Value of Bonds Payable**Learning Objective 7 Appendix 12A**2. Present Value $77,594**Overview:**Interest rates determine the present value of future amounts. (Round to the nearest dollar.)**Requirements:**1. Determine the present value of 10-year bonds payable with a face value of $86,000 and a stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance.2. Calculate the present value for the same bonds payable as in Requirement 1, but with a market interest rate of 16%.3. Calculate the present value for the same bonds payable as in Requirement 1, but with a market interest rate of 12%.In this exercise, you'll learn how changes in market interest rates affect the present value of bonds payable. By following the requirements, you'll actively apply the financial concepts necessary to determine present values, which will help in understanding how bonds are valued in the market. (Note: There are no graphs or diagrams in this exercise.)

Step 1: Calculate the semiannual coupon payment:Coupon payment (C) = Face value (F) * Stated…

Interest rates determine the present value of future amounts. (Round to the nearest dollar.) Requirements 1. Determine the present value of 10-year bonds payable with face value of $86,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the market interest rate is 12%.

Interest rates determine the present value of future amounts. (Round to the nearest dollar.) Requirements 1. Determine the present value of 10-year bonds payable with face value of $86,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the market interest rate is 12%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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When bonds are sold at a discount, If the annual straight-line amortization amount is compared to the annual effective interest amortization amount over the life of the bond issue, the annual amount of the straight-line amortization of discount is: A. Higher than the effective interest amount every year. B. Higher than the effective interest amount in the early years and less than the effective interest amount in the later years C. Less than the effective interest amount in the early years and more than the effective Interest amount in the later years. D. Less than the effective interest amount every year.
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