Question
Present Value of an Annuity 1) On January 1, 2016, you win $2,600,000 in the state lottery. The $2,600,000 prize will be paid in equal
Present Value of an Annuity
1) On January 1, 2016, you win $2,600,000 in the state lottery. The $2,600,000 prize will be paid in equal installments of $260,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31, 2016. If the current interest rate is 5%, determine the present value of your winnings. Use Table 2. Round to the nearest whole dollar. $
2) Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense
Evans Co. produces and sells motorcycle parts. On the first day of its fiscal year, Evans Co. issued $20,000,000 of four-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following:
a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 4 and Exhibit 5. Round to the nearest dollar. $
b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. $
c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. $
d. The amount of the bond interest expense for the first year. Round to the nearest dollar. $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started