Allen Inc. sold the rights to use one of its patented processes that will result in cash receipts of $2,500 at the end of each of the next four years and a lump sum receipt of $4,000 at the end of the fifth year. The total present value of these payments if interest is at 9% is:. Choose the closest answer.

A) $14,000.

B) $11,468.

C) $12,100.

D) $10,699.

PVA 9% 4 pds 3.23972

PVA 9% 5 pds 4,58720

PV 1 9% 4 pds .72451 .

PV 1 % 5 pds .64993

Given a set of present value tables, an annual interest rate, the dollar amount of equal payments made, and the number of semiannual payments, what other information is necessary to calculate the present value of the series of payments?

A. The future value of the annuity.

B. The timing of the payments (whether they are at the beginning or end of the period).

C. The rate of inflation.

D. No other information is required.

The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest:

A. Less the present value of all future interest payments at the rate of interest stated on the bond.

B. Plus the present value of all future interest payments at the rate of interest stated on the bond.

C. Plus the present value of all future interest payments at the market (effective) rate of interest.

D. Less the present value of all future interest payments at the market (effective) rate of interest.

.15... Roman Tires Inc. issues bonds due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually. The market rate for this type of bond is 5%. What is the issue price of the bonds?

A. $538,973.

B. $464,469.

C. $537,194.

D. $500,000.

PV 1 2.5% 20pds .61027 PVA 2.5% 20pds 15.56816

PV 1 3% 10pds .74409 PV A 3% 20pds 14.87747

When bonds are sold at a premium, if the annual straight-line amortization amount is compared to the annual effective interest amortization amount over the life of the bond issue, the annual amount of the straight-line amortization of premium is:

A. Higher than the effective interest amount in the early years and less than the effective interest amount in the later years.

B. Less than the effective interest amount in the early years and more than the effective interest amount in the later years.

C. Higher than the effective interest amount every year.

D. Less than the effective interest amount every year.