Question
Background: On January 1, 2022, the company has issued a 14 year $100,000 bonds payable. The bond calls for an annual payment of interest
Background: On January 1, 2022, the company has issued a 14 year $100,000 bonds payable. The bond calls for an annual payment of interest on 12/31 at a contractual (stated) rate of 8%. Given the credit standing of the company, an interest rate of 6.25% has been imputed as the effective rate. The principal amount of the bond is due at maturity. 1. At what amount should the bond payable be recorded on 1/1/22 (i.e., what is the present value of future cash payments for the company)? Enter the Excel formula (not numbers) in cell B8 in Worksheet. Note: Microsoft Excel's pv function is recommended (there are multiple ways!) The function is "-PV(rate,nper,pmt,fv)", where = rate effective interest rate, nper number of periods, pmt periodic payments such as annuity during the period, fv-future one time cash amount such as maturity amount. Memo: Depending the version of your EXCEL, the output might be a negative amount. Simply multiply by-I to get a positive value.
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