Problem
Simpson Inc. purchased 5, $4,000, 11% bonds of Hillsdale Corporation when the market rate of interest was 10%. Interest is paid semiannually on the bonds, and the bonds mature in 4 years.
Instructions:
Compute the total price paid by Simpson Inc. for the bonds showing your calculation for the present value of the principal and the present value of the interest payments.
Present value tables (Exhibit 8-14 and Exhibit 8-15) are available on pages 452 and 453 of your Harrison, Horngren, and Thomas textbook. NOTE: Be sure you review the PV Tables completely to ensure you find the correct period and interest rate for the calculation.