Present value of 40 periodic payments at 6% (from Table 2*):
*From Appendix B
E3A. Valuing Bonds Using Present Value
Choice A
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a.
b.
c.
d.
e.
Present value of 20 periodic payments at 5%
Present value of 40 periodic payments at 6%
*From Appendix B
Present value of 40 periodic payments at 3%
E4A. Valuing Bonds Using Present Value
Present value of 20 periodic payments at 4%
Present value of 20 periodic payments at 3%
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Face value × 0.057 =
Face value =
Face value =
Face value of 30-year, 8% zero coupon bonds, compounded annually:
Present value of a single payment at the end of 30 periods at 8% (from Table 1*):
$877,192,982
$2,380,952,381 or about $2.38 billion
Present value of a single payment at the end of 50 periods at 10% (from Table 1*):
Face value of 50-year, 10% zero coupon bonds, compounded annually:
Present value of a single payment at the end of 30 periods at 10% (from Table 1*):
E5A. Zero Coupon Bonds
Face value of 30-year, 10% zero coupon bonds, compounded annually:
or about $877 million
$50,000,000
*From Appendix B
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1. a.
b.
c.
2. a.
b.
c.
3. a.
b.
c.
Note: Part 2 and Part 3 are identical.
E6A. Straight-Line Method
Interest expense:
Amortization of bond premium:
Cash received:
Bonds payable:
$2,000,000
Cash paid in interest:
The difference of $80,000 is called unamortized bond premium.
Interest expense:
Amortization of bond premium:
Cash paid in interest:
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/(5 ×2
E7A. Straight-Line Method
2014
$640,000 years
To pay semiannual interest and amortize
the discount
)
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1. a.
×=
b.
c.
2. a.
b.
( $250,000 × × 6 / 12 )
( $265,000 × × 6 / 12 )
c.
0.095
0.089
E8A. Effective Interest Method
$265,000
–
=
Cash received:
Bonds payable:
$250,000
$250,000 1.06
Amortization of bond premium:
Cash paid in interest:
Interest expense:
The difference of $15,000 is called unamortized bond premium.
14-13
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=
1.
E9A. Effective Interest Method
2014
$1,753
E10A. Bond Retirement
Cash paid:
Loss:
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