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Kelly Company acquired $500,000 face value of the outstanding bonds of Steedly Company on January 1, 2013. The bonds pay interest semiannually on June 30 and December 31 at an annual rate of 7% and mature on December 31, 2015. The bonds were priced on the market on January 1, 2013, to yield 6% compounded semiannually. Kelly Company classifies these bonds as held-to-maturity securities. a. Compute the amount that Kelly Company paid for these bonds, excluding commissions and taxes.
Your rich aunt has promised to give you $2,000 per year at the end of each of the next four years to help you pay for college. Using a discount rate of 12%, the present value of the gift can be stated as
- a. PV =$2,000 (PV factor, i = 4%, n = 12).
- b. PV = $2,000 (Annuity PV factor, i = 12%, 11 = 4).
- c . PV =$2,000 (Annuity FV factor, i = 12%, n = 4).
- d. PV = $2,000 x 12% x 4.
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