# ACTG 2200 Lecture Notes - Lecture 7: Authorised Capital, Interest Expense, Net Income

For unlimited access to Class Notes, a Class+ subscription is required.

Bonds

1. Money owed goes up each year

a. If you owe 100,000 after X years

b. Can take off Y% every year

c. 100,000 has a value today

2. Interest paid on every year

a. If 100,000 after X years

b. Pay Y% on top every year

c. Every % paid on the year has a value today

Need to Know:

Term

o Find on sheet

Compounding period

I (interest rate)

o Find on sheet

o AKA: bond rate, coupon rate, stated rate

Principal

EX:

Term: 5

Compounding period: N = 5

I: 6%

Principal: 100,000

- 6% on principal = $6,000 each year

1. I and N (sheet 1) = .74726

a. .74726 * 100,000 = $74,726

2. I and N (sheet 2) = 4.21236

a. 4.21236 * 6,000 = $25,274

- $74,726 + $25,274 = $100,000

EX:

Face Value: $250,000

Term: 5

Compounding period: N = 10

I: 7%

Payment: $17,500

o = 250,000 * .07

1. Present Value (PV) of 250,000 for 10 periods (table 2)

a. 250,000 * 0.50835 = $127,087.50

2. PV of 250,000 for 10 periods (table 4)

a. 17,500 * 7.02358 = $122,912.65

- $127,087.50 + $122,912.65 = $250,000

find more resources at oneclass.com

find more resources at oneclass.com