Calculate the Price of a 90 Day NCD with a Face

question 20

Essay

Calculate the price of a 90 day NCD with a face value of $1 million and its price 30 days later, assuming that it was traded at 6% p.a.in both cases.How much interest was accumulated?

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Definitions:

Sold at Discount

Refers to items sold below their usual selling price, often to clear inventory or promote sales.

Straight-line Method

The straight-line method is a depreciation technique that allocates an equal amount of depreciation expense on a tangible asset over its useful life.

Amortization

The process of spreading out the cost of an intangible asset over its useful life.

Discount on Bonds Payable

The amount by which a bond's selling price is less than its face value or principal amount, typically reflecting market interest rates higher than the bond's coupon rate.