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Topic: Bond Pay. Ques. - from Becker Sim. (

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Crammer
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Posted: 13 Nov 2009 at 17:09 \| IP Logged

I REALLLLLY appreciate you typing all that. It makes things clearer, and when I read, it definitely makes sense - I need to calc. the Interest paid (based off of stated coupon rate) X the annuity factor (based on market rate).

BUT then I open the damn book and it's not calculating the selling price that way!

lovethepirk
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Posted: 13 Nov 2009 at 17:55 \| IP Logged

Post the example.....

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lovethepirk
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Posted: 13 Nov 2009 at 18:03 \| IP Logged

Found ur example looking at it.......

__________________
FAR - Not enough acc hours
REG - ""
AUD - ""
BEC - ""

Using Wiley books and CPAnet!!!

Crammer
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Posted: 13 Nov 2009 at 18:08 \| IP Logged

Assume that Kristi Corp. issued a 10%, $1,000,000 bond due in 5yrs. Interest is due semiannually. The yield or market rate is 12%. Determine the selling price of the bond, noting the amount of premium or discount. Bonds were issued January 1.

PV INFO:

PV of $1 at 6% for 10 periods = .55839

PV of an annuity of $1 at 6% for 10 periods = 7.36009

---------------------------------------------

They calculated:

PV of interest: $50,000 x 7.36009 = $368,005

PV of Principal: $1,000,000 x .55839 = $558,390

Selling Price = $926,395

Dr. Cash 926,395

Dr. Discount on BP 73,605

CR. BP (1,000,000)

lovethepirk
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Posted: 13 Nov 2009 at 18:09 \| IP Logged

In that becker example there are doing it correctly. What r u missing.

They are taking the stated rate 10% times the 1000000 to get 100000.
Its semi annual so that makes the payment 50000

the market rate is 12% so semi annually that is 6%

They are discounting the pmt by 6% 10 times

__________________
FAR - Not enough acc hours
REG - ""
AUD - ""
BEC - ""

Using Wiley books and CPAnet!!!

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