Thread: Anyone know anything about accounting

No. And I'm glad, because if I did, I'd look like this....

Originally Posted by bigss75

I can't figure out this accounting problem

40,000,000 5year, 11% bond with interest paid semiannually, determine the present value?

I want that bond!

It's a compounded interest question. Mind you, I'm not an accountant, but the question seems straight-forward.

40,000 * .11 = NewAmount

Then just repeat that equation 9 more times (semi-annual is every six months and you've already done the first), replacing the initial $40,000 with the interest adjusted amount through each iteration.

Keep in mind that I have no idea if your teacher expects you to include taxes and such in the final number.

Originally Posted by DOMS

I want that bond!

It's a compounded interest question. Mind you, I'm not an accountant, but the question seems straight-forward.

40,000 * .11 = NewAmount

Then just repeat that equation 9 more times (semi-annual is every six months and you've already done the first), replacing the initial $40,000 with the interest adjusted amount through each iteration.

Keep in mind that I have no idea if your teacher expects you to include taxes and such in the final number.

Nah it's that plus the interest compounded semiannually so that you earn interest next year off of this year's interest.

Thought there was a google calculator somewhere for everything ....

I'll go ahead and do year 1 for you, not going to do the whole thing though.

11% interest / year = 5.5% per 6 month segment

Year 1:
Starting value: 40,000,000
6 month interest: 40,000,000 * 0.055 = 2,200,000
6 month value: 40,000,000 + 2,200,200 = 42,200,000
End of year interest: 42,200,000 * 0.055 = 2,321,000
End of year value: 42,200,000 + 2,321,000 = 44,521,000

Year 2:
Starting value: 44,524,000
.....

Moral of the story:

If you have $40,000,000, you make shit tons of money from interest alone.

Thats what I thought, but I guess it involves doing the present value of the compounding interest plus the present value of the annuity

Do you have a financial calculator? If so, I believe you would enter the numbers something like this:

FV = 40,000,000
n - 5 x2 = 10 (semi-annual compound interest)
i = 11%/2 (semi-annual compound interest)
calc PV

I have to get going for work, but can help when I get back.

Oh shit, I just looked at the problem again.. what is the payout of the bond (PMT)? Not even payments are they?

I guess the answer was 41544228 no clue how they got it though.

You should really try to figure out how they did it. That's the difference between just getting a good grade are really learning.

Moral of the story: Don't try to do surprise loan calculations at 6:39 in the morning. Or, at least, until you've had your first 20 ounces of Diet Dr. Pepper.

Oh, and now that I awake, I'm pretty sure danzik is spot on. The key is that the interest is paid every six months.

Originally Posted by danzik17

Moral of the story:

If you have $40,000,000, you make shit tons of money from interest alone.

This is one of the many reasons that uninformed people like to cry out that the rich are getting richer and the poor are getting poorer.

Originally Posted by DOMS

This is one of the many reasons that uninformed people like to cry out that the rich are getting richer and the poor are getting poorer.

Its true, but it is the poor people's fault, and the rich people's good decisions.

Originally Posted by KelJu

Its true, but it is the poor people's fault, and the rich people's good decisions.

My sarcasm meter appears to be broken. A little clarification, please.