Chapter 5, Problem 5.15P

To determine

Present Value:

The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:

$\text{Present value of an amount = }\frac{\text{Future value}}{{\left(\text{1 + interest rate}\right)}^{\text{number}\text{of}\text{periods}}}$

Bonds

Governmental agencies, companies and universities are issuing a type of interest bearing notes payable is called as bond. It is one of the important debt instrument used for raising funds.

To determine: The initial bond liability.