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:

Bad Debt Expense

The estimated amount of credit sales that a company does not expect to collect due to customer's inability to fulfill payment obligations.

Uncollectible

Financial term referring to accounts receivable that are considered unlikely to be collected due to debtor default.

GAAP

Generally Accepted Accounting Principles; a collection of commonly-followed accounting rules and standards for financial reporting.

Allowance Method

An accounting technique used to account for bad debts by estimating uncollectible accounts at the end of each period.