Ohlson Co. is preparing an Excel spreadsheet for its 20-year, 4.5%, $500,000 bonds payable. The bonds were issued on January 1 to yield 5% annually. Interest is paid semi-annually. A portion of the spreadsheet appears as follows: A B C D E 1 Stated rate: 0.045 2 Effective rate: 0.05 3 Face amount: 500,000 4 Term to maturity in years: 20 5 6 Period Cash Payment InterestExpense Change in Discount OutstandingBalance 7 0 8 1 9 2 What formula should Ohlson use in cell C8 to calculate interest expense for the first interest payment? Multiple Choice =B8 – D8 =E7*B3 =E7*B3/2 =E7*C2/2
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Ohlson Co. is preparing an Excel spreadsheet for its 20-year, 4.5%, $500,000 bonds payable. The bonds were issued on January 1 to yield 5% annually. Interest is paid semi-annually. A portion of the spreadsheet appears as follows:
| A | B | C | D | E | |
| 1 | Stated rate: | 0.045 | |||
| 2 | Effective rate: | 0.05 | |||
| 3 | Face amount: | 500,000 | |||
| 4 | Term to maturity in years: | 20 | |||
| 5 | |||||
| 6 | Period | Cash Payment | Interest Expense |
Change in Discount | Outstanding Balance |
| 7 | 0 | ||||
| 8 | 1 | ||||
| 9 | 2 |
What formula should Ohlson use in cell C8 to calculate interest expense for the first interest payment?
Multiple Choice
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=B8 – D8
-
=E7*B3
-
=E7*B3/2
-
=E7*C2/2
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