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Hello students, here is a question.
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On january 1, 2019, marta's company issues 10 million face value amount, 10 % bonds on yarn, 8 % per year.
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The bond mature on jan 1, 2024 and pay interest semiannually on june 30 and december 31.
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The relevant present value factor as given follow.
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The present value for 1 at 4 % for 10 periods will be 0 .6756.
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Present value of an annuity at 4 % for 10 periods is 8 .11.
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Present value of 1 at 5 % for 10 periods is 0 .6139.
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The present value of ordinary annuity at 5 % for 10 periods is 7 .72.
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The carrying amount of a bond liability, we have to round off to the nearest 1000 on that is on january 1, 2019.
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And we have some options given in the question, we have to choose the right options from this.
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So let us start solving this problem.
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First, we need to calculate the present value of a principal amount of 10 million will give a paid at the end of a bond terms.
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So we'll use the present value 1 at 4 % for 10 periods that is 0 .6756.
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So since the bond yield 8 % per year to pay the interest, so that is semiannually 8 % divided by 2, 8 % divided by 2 gives us 4%.
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The present value of principal will be principal is 10 million 10 million into 0 .6756...