1.Hogan Company has $1,000,000 of bonds outstanding. The unamortized premium is $14,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?
Hulse Corporation retires its $600,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $622,470. The entry to record the redemption will include a
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credit of $22,470 to Loss on Bond Redemption.
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debit of $22,470 to Premium on Bonds Payable.
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credit of $7,530 to Gain on Bond Redemption.
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debit of $30,000 to Premium on Bonds Payable.
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How much money would you have to invest today at 4% in order to have $200,000 fifteen years from now so that you can pay your health care costs when you retire?
Hooray! You won the lottery, but you have a choice of taking the $20,000 per year for the next 20 years or taking a lump settlement today. What would be the minimum amount you would accept today if you decide that 8% is a reasonable discount rate?
Your company has been bought out by another company. In the acquisition, you have been asked to leave the company and as severance pay may take either $100,000 per year for the next ten years or a lump settlement today. If 10% is a reasonable discount rate, what would be the minimum amount you would accept today?
Loom, Inc. has outstanding a $1,000 face value bond with a 5% contract interest rate. The bond has 10 years remaining until maturity. If interest is paid annually, what is the value of the bond if the required rate of return is 6%?
What is the market value of a $1,000 bond, which has a coupon interest rate of 10% and will mature in 10 years if it is discounted at 15%? Interest is paid annually.
The amount you must deposit now in your savings account paying 5% interest, in order to accumulate $15,000 for your first tuition payment when you start college in 3 years is
Suppose you have a winning lottery ticket and you are given the option of accepting $7,000,000 three years from now or taking the present value of the $7,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is
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$6,230,000.
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Montz Company is considering investing in an annuity contract that will return $80,000 annually at the end of each year for 12 years. Montz has obtained the following values related to the time value of money to help in its planning process and compounded interest decisions.
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Present value of 1 for 12 periods at 9%
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0.35554
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Future value of 1 for 12 periods at 9%
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2.81267
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Present value of an annuity of 1 for 12 periods at 9%
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7.16073
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Future value of an annuity of 1 for 12 periods at 9%
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20.14072
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To the closest dollar, what amount should Montz Company pay for this investment if it earns a 9% return?
Glover Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of interest of 8%, payable semiannually. The discount rate for such securities is 10%. How much can Glover expect to receive from the sale of these bonds?
Valente Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of interest of 10%, payable semiannually. The discount rate for such securities is 8%. How much can Valente expect to receive from the sale of these bonds?
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Question 12
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Dodd Company is considering an investment, which will return a lump sum of $675,000 four years from now. Below is some of the time value of money information that Dodd has compiled that might help in planning compounded interest decisions.
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Present value of 1 for 4 periods at 10%
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0.68301
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Future value of 1 for 4 periods at 10%
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1.46410
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Present value of an annuity of 1 for 4 periods at 10%
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3.16986
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Future value of an annuity of 1 for 4 periods at 10%
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4.64100
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To the closest dollar, what amount should Dodd Company pay for this investment to earn a 10% return?
Ando Company earns 11% on an investment that pays back $660,000 at the end of each of the next 5 years. Ando finance department has the following values related to the time value of money to help in its planning process and compounded interest decisions.
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Present value of 1 for 5 periods at 11%
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0.59345
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Future value of 1 for 5 periods at 11%
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1.68506
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Present value of an annuity of 1 for 5 periods at 11%
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3.69590
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Future value of an annuity of 1 for 5 periods at 11%
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6.22780
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To the closest dollar, what is the amount Ando invested to earn the 11% rate of return?
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$1,112,139
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In order to compute the present value of an annuity, it is necessary to know the
- discount rate.
- number of discount periods and the amount of the periodic payments or receipts.
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Something in addition to 1 and 2.
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A $30,000, 8%, 10-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?
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40 interest periods, 2% interest
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10 interest periods, 2% interest
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10 interest periods, 8% interest
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40 interest periods, 8% interest
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If a bond has a contract rate of interest of 6%, but the discount rate of interest is 8%, the bond
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will sell at a premium (more than face value).
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will sell at its face value.
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may sell at either a premium or a discount.
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will sell at a discount (less than face value).
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When determining the proceeds received when issuing a bond, the factor applied to the amount of the bond principal is determined from the table of the
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present value of an annuity 1.
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future value of an annuity 1.
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Question 18
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If a bond has a contract rate of 10% and is discounted at 10%, then the proceeds received at issuance will be
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greater than the face value of the bonds.
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less than the face value of the bonds.
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equal to the face value of the bonds.
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Rhode Company is about to issue $4,000,000 of 5-year bonds, with a contract rate of interest of 8%, payable semiannually. The discount rate for such securities is 10%. How much can Rhode expect to receive from the sale of these bonds?
Chenard Company is about to issue $3,000,000 of 8-year bonds paying a 12% interest rate with interest payable semiannually. The discount rate for such securities is 10%. Below are time value of money factors that Chenard uses to calculate compounded interest.
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8 periods, 10%
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16 periods, 5%
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8 periods, 12%
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16 periods, 6%
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Present value 1
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0.46651
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0.45811
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0.40388
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0.39365
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Future value 1
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2.14359
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2.18287
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2.47596
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2.54035
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Present value of an annuity of 1
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5.33493
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10.83777
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4.96764
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10.10590
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Future value of an annuity of 1
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11.43589
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23.65749
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12.29969
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25.67253
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To the closest dollar, how much can Chenard expect to receive for the sale of these bonds?
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Patterson Company is about to issue $8,000,000 of 10-year bonds paying an 8% interest rate with interest payable semiannually. The discount rate for such securities is 10%. Below are time value of money factors that Patterson uses to calculate compounded interest.
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10 periods, 8%
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20 periods, 4%
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10 periods, 10%
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20 periods, 5%
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Present value 1
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0.46319
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0.45639
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0.38554
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0.37689
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Future value 1
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2.15892
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2.19112
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2.59374
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2.65330
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Present value of an annuity of 1
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6.71008
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13.59033
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6.14457
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12.46221
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Future value of an annuity of 1
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14.48656
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29.77808
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15.93743
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33.06595
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To the closest dollar, how much can Patterson expect to receive for the sale of these bonds?
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