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Calculating the price of bonds always seems to be the hardest thing remember if you don’t use it on a daily basis. Some key ideas to keep in mind are:

Price of bonds = Present value of principal + Present value of interest payments

Interest to be paid each period is determined by coupon rate (stated interest rate) for that period.

Present value calculation is based on market interest rate.

On January 1, 2006, Company A issues long-terms bonds which are due on January 1, 2011. Interest is paid semiannually on January 1 and July 1 each year. Face amount of bonds is $500,000 with stated interest rate (coupon rate) of 10%. At the time of issuance, market interest rate is 8%. What will be the price of bonds issued by Company A?

Market interest rate = 8%

Market interest rate for a semiannual period = 8% / 2 = 4%

r = 0.04 (per semiannual period),

n = 10 (semiannual periods)

Present value of principal

= $500,000 x Present value factor for a single payment (4%, 10 periods)

= $500,000 x 0.6756

= $337,800

Interest payment each semiannual period

= $500,000 x 5%

= $25,000

(Coupon rate for a semiannual period = 10% / 2 = 5%.)

Present value of interest payments

= Interest payment each semiannual period

x Present value factor for an ordinary annuity (4%, 10 periods)

= ($500,000 x 5%) x 8.1109

= $202,773

Price of bonds

= Present value of principal + Present value of interest payments

= $337,800 + $202,773

= $540,573

The bonds will be sold at a $40,573 premium over the face amount.

($540,573 – $500,000 = $40,573)

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It’s not beer and it’s not wine, but making hard apple cider is always fun. You can do it the old fashioned way by pressing the apples or you can purchase the apple cider. If you purchase the cider, just make sure that there are no preservatives in it. Personally, I buy the apple cider from a local fruit market.

The recipe I found is from Sallys-Place.com and will make a 5 gallon batch. There is also an interesting history of hard cider on that site that is worth reading.

Enjoy the recipe and the reading.

Cidermaking is easy and fun. Here is a basic recipe for a Farmhouse Style cider (ingredients for five gallons):

Transfer the juice and sugar using a sanitized funnel or food grade plastic hose into a sanitized glass or stainless-steel container at room temperature. Allow the sugar to dissolve and then pitch the lager yeast and affix a fermentation lock atop the carboy It will soon begin to bubble away releasing carbon dioxide as the yeast converts the sugars into alcohol. Allow the cider to ferment and mellow for at least two months before transferring it with your sanitized food grade hose into bottles, a keg, or any vessel you prefer. Then enjoy. Any homebrew supply shop can get you started with the proper advice and equipment.

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