On January 1, 2016, Action Corporation Issued a Two-Year, 5

question 47

Essay

On January 1, 2016, Action Corporation issued a two-year, 5%, $1,000 bond payable. Beginning in 2017, interest is payable every January 1 over the life of the bond. The market rate of interest on January 1, 2016 is 3%. Calculate the present value of the bond issued by Action on January 1, 2016.

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Definitions:

Price

The budgeted sum anticipated, imposed, or tendered in indemnity for something.

Surplus Amount

The excess quantity of a product that occurs when the supply of the product exceeds the demand for it at a given price.

Consumer Surplus

A measure of the difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Price

The price one must pay to obtain a service or product.