Answer:
Value of the bond = $862.013
Explanation:
The value of the bond is the present value of the future cash receipts expected from the bond. The value is equal to present values of interest payment and the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of the bond can be worked out as follows:
Step 1
<em>Calculate the PV of Interest payment
</em>
Present value of the interest payment
PV = Interest payment × (1- (1+r)^(-n))/r
Interest payment = $40
PV = 40 × (1 - (1.05)^(-12×2)/0.05)
= 40 × 13.7986
= 551.945
Step 2
<em>PV of redemption Value
</em>
PV of RV = RV × (1+r)^(-n)
= 1000 × (1.05)^(-12×2)
= 310.067
Step 3
<em>Calculate Value of the bond </em>
= 551.94567 + 310.067
=862.01
Value of the bond = $862.013
X=-3.5 is the answer if you are allowed to have negatives as your answer
Answer:
$1,069.74
Explanation:
We use the present value formula which is shown in the attachment below:
Data provided in the question
Future value = $1,000
Rate of interest = 12%
NPER = 16 years
PMT = $1,000 × 13% = $130
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the value of the bond is $1,069.74
Answer:
$337.50
Explanation:
the premium on a three year policy = $1,350
premium per year = $1,350 / 3 = $450
premium per month = $450 / 12 = $37.50
Since the premium covered April to December, 9 months of insurance expense are accrued.
insurance expense for 9 months = $37.50 x 9 = $337.50
The journal entries should be:
April 1, purchase a 3 year insurance policy:
Dr Prepaid insurance 1,350
Cr Cash 1,350
December 31, accrued insurance expense:
Dr Insurance expense 337.50
Cr Prepaid insurance 337.50
