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General Accounting Discussions: Present Value of Interest

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    • CommentAuthormemcneely
    • CommentTimeMar 31st 2007
     
    Hi --
    I have a question that is probably pretty easy, but I just don't know :o)

    3 million, 10 yr bond, stated rate of 8%, effective rate of 8.25%
    the yearly interest payment will be 240,000...my formula tells me to multiply the 240,000 x 8.25% pvoa amount to get the present value of interest, but the table does not use .25 increments...so how do I figure this out/convert that amount to the actual pvoa amount? Also need to figure the present value of single amount for 8.25% to get the present value of maturity.

    Thanks for your help!!
    memcneely
    • CommentAuthorCounter
    • CommentTimeApr 1st 2007
     
    You could interpolate, or you could use a financial calculator.
    If you have a present value table showing the factors for 8% and 9%, you would measure the difference between the two present value factors. Then you would take 1/4 of the difference. If the 8% factor is 6.71008 and the 9% factor is 6.41766, then the difference is 0.29242. One-fourth of that difference is 0.073105. So the factor for 8.25% is approximately 6.63698.

    If the bond's interest payments are semiannual, you should use a financial calculator.
    • CommentAuthormemcneely
    • CommentTimeApr 1st 2007
     
    You are awesome....Thank you for your help!!

    I am going to try that right now :o)

    memcneely

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