Reference no: EM132861

Question :

"Evaluate the market value of the given bond:

8% bonds of $150,000 sold 30 months after bond issue date. 15-year life, interest payable twice yearly. Effective rate of 10%."

Determine the net present value considering the bond was sold at issue date at its discount, and that number I get is $126,945. What I am unsure of how to do is plugging in the 30 months after. It was sold at a discount of $23,055. It assumes amortize it over the 15 years for a net each year of $1,537 yearly, and then take that time the 2.5 years, which is $3,843. Then subtract this to the original bond amount of $150,000.

So essentially, is my answer of $146,157 right?

2) This one, need more assistance on:

"Consider that $140,000 of X Company's 8% bonds is sold on the issue date for $128,598. Interest is payable twice a year, and the bonds have a 15 year life. The purchase price gives a 9% return on investment. What entries could be made for the first interest payment for both the investor and X Company using the straight-line technique the effective-interest method?"

What is throwing me off is the 9% return on investment