On December 31, 2018, when the market interest rate is 8%, Arnold Corporation issues $200,000 of 6%, 10-year bonds payable

On December 31, 2018, when the market interest rate is 8%, Arnold Corporation issues $200,000 of 6%, 10-year bonds

payable. The bonds pay interest semiannually. Determine the present value of the bonds at issuance.

Solutions

Expert Solution

Step 1: Definition of the bonds

A bond is a type of long-Term liability that the company issues to fulfill its money needs. The bondholders receives a fixed amount of interest from the company.

Step 2: Present value of bonds

To find the present of the bonds, first of all, the present value of the principal is calculated

The present value of the bonds at issuance is $216,652.

Sahil Dangi answered 1 year ago

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