

Subject:
Accounting problem
Category: Business and Money > Accounting Asked by: accountanttobega List Price: $10.00 
Posted:
05 Sep 2005 13:19 PDT
Expires: 05 Oct 2005 13:19 PDT Question ID: 564548 

Subject:
Re: Accounting problem
Answered By: omnivorousga on 05 Sep 2005 17:25 PDT Rated: 
Accountanttobe ? There?s a major assumption that needs to be made here because it?s the only way that we can answer this question: your 8% bonds would be issued at par value (100% value or $15 million). In this case, the market for corporate bonds requires a return of 8%  whether on zerocoupons or annual returns. (There?s also a minor assumption  which is covered in the question: that the 8% in bond interest is paid annually. Paid quarterly or semiannually it will actually have a slightly higher rate of return due to compounding.) So the question becomes: if you receive $15 million, what will it be worth in 20 years, compounded at 8% per year. FV = PV * (1 + i)^t Where, FV = future value PV = present value i = interest rate (in decimals) t = number of complete years FV = $15,000,000 * (1.08)^20 FV = $15 million * 4.6610 = $69,914,357 There is no Google search strategy here, as this is a simple PV/FV question. Best regards, OmnivorousGA 
accountanttobega rated this answer: 

Subject:
Re: Accounting problem
From: myoaringa on 05 Sep 2005 15:04 PDT 
Sounds like homework (see FAQs). Just a tip: you only need to calculate one of the types of bonds. 
Subject:
Re: Accounting problem
From: accountanttobega on 05 Sep 2005 15:51 PDT 
It is.......and I am stuck. :( 
Subject:
Re: Accounting problem
From: myoaringa on 05 Sep 2005 16:09 PDT 
You're honest, anyway, which is unusual on this type of question. Get out the book and read about bonds. Bonds with an 8% coupon: what does that tell you? The interest is paid by the coupons, so ... Zero bonds: search göögle and you should find a suggestion of what you need to calculate, and if you are taking the course, you probably have a pocket calculator that can do it: financial/cash flow functions. If not, there are calculators online that can handle present value, future value. Good luck! 
Subject:
Re: Accounting problem
From: nelsonga on 05 Sep 2005 16:54 PDT 
Hi, myoaringa. Only questions cannot contain Google. Answers, comments, and clarificatiosn can mention Google. 
If you feel that you have found inappropriate content, please let us know by emailing us at answerssupport@google.com with the question ID listed above. Thank you. 
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