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    Bond Issues and Present Value of Money

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    1.
    Limeway Company issues $5,000,000, 6%, 5-year bonds dated January 1, 2007 on January 1, 2007. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
    2.5% 3% 5% 6%

    Present value of a single sum for 5 periods .88385 .86261 .78353 .74726

    Present value of a single sum for 10 periods .78120 .74409 .61391 .55839

    Present value of an annuity for 5 periods 4.64583 4.57971 4.32948 4.21236

    Present value of an annuity for 10periods 8.75206 8.53020 7.72173 7.36009

    A.) $5,000,000
    B.)$5,216,494
    C.) $5,218,809
    D.)$5,217,308

    2.

    On January 1, 2007, Bleeker Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are:

    Present value of 1 for 8 periods at 6%.. .... .627
    Present value of 1 for 8 periods at 8%.. .... .540
    Present value of 1 for 16 periods at 3%.. .... .623
    Present value of 1 for 16 periods at 4%.. .... .534
    Present value of annuity for 8 periods at 6%.. .. 6.210
    Present value of annuity for 8 periods at 8%.. .. 5.747
    Present value of annuity for 16 periods at 3%.. 12.561
    Present value of annuity for 16 periods at 4%.. 11.652

    The present value of the principal is:

    $534,000.
    $540,000.
    $623,000.
    $627,000.

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    https://brainmass.com/business/annuity/accounting-237185

    Solution Preview

    1.

    Limeway Company issues $5,000,000, 6%, 5-year bonds dated January 1, 2007 on January 1, 2007. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
    2.5% 3% 5% 6%

    Present value of a single sum for 5 periods .88385 .86261 .78353 .74726

    Present value of a single sum for 10 periods .78120 .74409 .61391 .55839

    Present ...

    Solution Summary

    The solution examines bond issues and the present value of money.

    $2.19

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