Exhibit 14-4 A $300, 000, ten-year, 6% bond issue was sold to yield 7% interest payable annually.Actuarial information for 10 periods is as follows:
$\begin{array}{lll}
&6\%&7\%\
\text { Present value of } 1 & .558 & .508 \
\text { Present value of an anmuity of } 1 & 7.360 & 7.024
\end{array}$
- Refer to Exhibit 14-4.At date of issuance cash received would be

Question

Quizplus · Accepted Answer

The cash received is calculated using the present value of the principal and the present value of the annuity of interest payments. The principal is $300,000, and the interest payments are $18,000 annually ($300,000 * 6%). Using the 7% yield, the present value of the principal is $300,000 * 0.508 = $152,400, and the present value of the annuity is $18,000 * 7.024 = $126,432. Adding these gives $278,832.