SMG AC 221 Lecture Notes - Lecture 14: Interest Expense, Interest Rate
6 Dec 2016
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Poll question: issues a 7 year 8% million bond with semi-annual coupons. Pmt = (coupon rate x fv) / number of periods per year. Interest rate = yearly given market interest rate / number of periods per year. Another way to say coupon or payment: fixed rate notes. Fv = 300, n = 4, i = . 08%, pmt = 0. Dr. cash 299. 092 m (dr. discount on bond payable) 0. 918 m. *only use 1: premium or discount on bond payable, depends on if fv or pv is higher. * cash = present value, bond payable = future value. * find discount/premium on bond payable by finding the difference. Net bond payable = bond payable discounts or premiums (always equals the present value) Present value increases with each period, as investors lose risk & pv gets closer to fv. April 2018 moving from 3 to 2 periods left.
