Determining the present value of bond at issuance On December 31, 2018, when the market interest rate is 12%

Determining the present value of bond at issuance

On December 31, 2018, when the market interest rate is 12%, Benson Realty issues

$600,000 of 9.25%, 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 present value

The value of the invested sum at present as compared to the future value is known as the present value.

Step 2: Present value of the bonds at issuance

The present value of the bonds at the time of the issue means the value at the time when the bonds are issued.

Present value of principal:

The present value of the bond as issuance is $505,493

Sahil Dangi answered 1 year ago

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