This posting addresses the present value of bond principal.
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On January 1, 2010, Ellison Co. issued 8-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 as follows:
Present value of one for eight periods at 6% .627
Present value of one for eight periods at 8% .540
Present value of one for 16 periods at 3% .623
Present value of one for 16 periods at 4% .534
Present value of annuity for eight periods at 6% 6.210
Present value of annuity for eight 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% 11.852
The present value of the principal is:
a.) 534,000
b.) 540,000
c.) 623,000
d.) 627,000.
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Solution Summary
The solution provides the correct answer to the multiple choice question for Ellison Co., which states, On January 1, 2010, Ellison Co. issued 8-year bonds with a face value of 1,000,000 and a stated interest rate of 6% payable seminanually on June 30 and December 31. The bonds were sold to yield 8% ...
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The present value of 1 for 16 periods at 4% is .534. We use 4% ...
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