Present Value of a Lump Sum
Present value = Future value x PV factor for i = 6%; n=5
Present value = $ 13,383 x 0.747
Present value = $ 9,997
Present Value of an Annuity
Amount of
each cash Annuity PV factor
Present Value = flow x for I = 6%; n=5
Present Value = $ 2,000 x 4.212
Present Value = $ 8,424
Present Value of a Bonds Payable
1. Find the present value of principal
2. Find the present value of stated interest
3. Add present value of principal to present value of interest
1. Present Value of Principal
Present value = Future value x PV factor for i = 5%; n = 10 *If interest pays SEMI-A
Present value = $ 100,000 x 0.614 Use MARKET interest ra
Present value = $ 61,400
2. Present Value of Stated Interest
Amount of
each cash Annuity PV factor
Present Value = flow x for I = 5%; n = 10
Present Value = $ 4,500 x 7.722 *Use STATED interest rat
Present Value = $ 34,749 Use MARKET interest rat
3. Present Value of Bonds Payable
PV of Principal PV of Stated Interest
Present Value = (#1) + (#2)
Present Value = $ 61,400 $ 34,749
Present Value = $ 96,149
Present Value of a Bonds Payable
1. Find the present value of principal
2. Find the present value of stated interest
3. Add present value of principal to present value of interest
1. Present Value of Principal
Present value = Future value x PV factor for i = 4%; n = 10 *If interest pays SEMI-AN
Present value = $ 100,000 x 0.676 Use MARKET interest rat
Present value = $ 67,600
2. Present Value of Stated Interest
Amount of
each cash Annuity PV factor
Present Value = flow x for I = 4%; n = 10
Present Value = $ 4,500 x 8.111 *Use STATED interest rat
Present Value = $ 36,500 Use MARKET interest rat
3. Present Value of Bonds Payable
PV of Principal PV of Stated Interest
Present Value = (#1) + (#2)
Present Value = $ 67,600 $ 36,500
Present Value = $ 104,100
Future Value of a Lump Sum
Future value = Present Value x FV factor for i = 6%; n=5
Future value = $ 10,000 x 1.338
Future value = $ 13,380
Future Value of an Annuity
Amount of
each cash Annuity FV factor
Future Value = flow x for I = 6%; n=5
Future Value = $ 2,000 x 5.637
Future Value = $ 11,274
*If interest pays SEMI-ANNUALLY; double the number of payments; cut interest in half*
Use MARKET interest rate when pulling PV factors from the tables
*Use STATED interest rate to determine the amount of each cash flow: principal x stated interest rate x time: ($100,000 x 0.09 x 6/12)
Use MARKET interest rate when pulling PV factors from the tables
*If interest pays SEMI-ANNUALLY; double the number of payments; cut interest in half*
Use MARKET interest rate when pulling PV factors from the tables
*Use STATED interest rate to determine the amount of each cash flow: principal x stated interest rate x time: ($100,000 x 0.09 x 6/12)
Use MARKET interest rate when pulling PV factors from the tables
($100,000 x 0.09 x 6/12)
($100,000 x 0.09 x 6/12)
Beginning Principal Interest Total Ending
Balance Payment Expense Payment Balance
12/31/2024 $ 20,000
12/31/2025 $ 20,000 $ 5,000 $ 1,200 $ 6,200 $ 15,000
12/31/2026 $ 15,000 $ 5,000 $ 900 $ 5,900 $ 10,000
12/31/2027 $ 10,000 $ 5,000 $ 600 $ 5,600 $ 5,000
12/31/2028 $ 5,000 $ 5,000 $ 300 $ 5,300 $ -
Total $ 20,000 $ 3,000 $ 23,000
Cash $ 20,000
Notes Payable $ 20,000
Received cash in exchange for a note payable
Notes Payable $ 5,000
Interest Expense $ 1,200
Cash $ 6,200
Paid principal and interest payment
Principal $ 20,000
Principal pymt $ 5,000
Interest Rate 6%
Time 1
Beginning Principal Interest Total Ending
Balance Payment Expense Payment Balance
12/31/2024 100,075.00
1/31/2025 100,075.00 99.63 500.38 600.00 99,975.38
2/28/2025 99,975.38 100.12 499.88 600.00 99,875.25
3/31/2025 99,875.25 100.62 499.38 600.00 99,774.63
4/30/2025 99,774.63 101.13 498.87 600.00 99,673.50
5/31/2025 99,673.50 101.63 498.37 600.00 99,571.87
6/30/2025 99,571.87 102.14 497.86 600.00 99,469.73
7/31/2025 99,469.73 102.65 497.35 600.00 99,367.08
8/31/2025 99,367.08 103.16 496.84 600.00 99,263.91
9/30/2025 99,263.91 103.68 496.32 600.00 99,160.23
10/31/2025 99,160.23 104.20 495.80 600.00 99,056.03
11/30/2025 99,056.03 104.72 495.28 600.00 98,951.31
12/31/2025 98,951.31 105.24 494.76 600.00 98,846.07
Total $ 1,228.93 $ 5,971.07 $ 7,200.00
Building $ 150,000
Mortgages Payable $ 100,075
Cash $ 49,925
Purchased building with a mortgage payable and cash payment
Mortgages Payable $ 99.63
Interest Expense $ 500.38
Cash $ 600.00
Paid principal and interest payment
Principal $ 100,075
Total Pymt $ 600
Interest Rate 6%
Time 1/12 *Rounding errors
Interest Discount Carrying
Cash Paid Expense Amortized Amount
1/1/2024 $ 96,149
6/30/2024 $ 4,500 $ 4,885 385 $ 96,534
12/31/2024 $ 4,500 $ 4,885 385 $ 96,919
6/30/2025 $ 4,500 $ 4,885 385 $ 97,304
12/31/2025 $ 4,500 $ 4,885 385 $ 97,689
6/30/2026 $ 4,500 $ 4,885 385 $ 98,075
12/31/2026 $ 4,500 $ 4,885 385 $ 98,460
6/30/2027 $ 4,500 $ 4,885 385 $ 98,845
12/31/2027 $ 4,500 $ 4,885 385 $ 99,230
6/30/2028 $ 4,500 $ 4,885 385 $ 99,615
12/31/2028 $ 4,500 $ 4,885 385 $ 100,000
Total $ 45,000 $ 48,851 $ 3,851
Cash $ 96,149
Discount on Bonds Payable $ 3,851
Bonds Payable $ 100,000
Issued bonds at a discount
Interest Expense $ 4,885
Discount on Bonds Payable 385
Cash $ 4,500
Paid semiannual interest and amortized discount
Principal $ 100,000
Discount $ 3,851
Interest Rate 9%
Time 1/2 *Rounding errors
# of Periods 10
Interest Discount Carrying
Cash Paid Expense Amortized Amount
1/1/2024 $ 104,100
6/30/2024 $ 4,500 $ 4,090 410 $ 103,690
12/31/2024 $ 4,500 $ 4,090 410 $ 103,280
6/30/2025 $ 4,500 $ 4,090 410 $ 102,870
12/31/2025 $ 4,500 $ 4,090 410 $ 102,460
6/30/2026 $ 4,500 $ 4,090 410 $ 102,050
12/31/2026 $ 4,500 $ 4,090 410 $ 101,640
6/30/2027 $ 4,500 $ 4,090 410 $ 101,230
12/31/2027 $ 4,500 $ 4,090 410 $ 100,820
6/30/2028 $ 4,500 $ 4,090 410 $ 100,410
12/31/2028 $ 4,500 $ 4,090 410 $ 100,000
Total $ 45,000 $ 40,900 $ 4,100
Cash $ 104,100
Premium on Bonds Payable $ 4,100
Bonds Payable $ 100,000
Issued bonds at a premium
Interest Expense $ 4,090
Premium on Bonds Payable 410
Cash $ 4,500
Paid semiannual interest and amortized premium
Principal $ 100,000
Premium $ 4,100
Interest Ra 9%
Time 1/2 *Rounding errors
# of Period 10
