Question

On July​ 1, 2018, Mason​ & Beech Services issued $48,000 of 9​% bonds that mature in five years. They were issued at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December​ 31, 2018, what is the total amount paid to​ bondholders?

Answer 1

December 31th, 2018 the bondholder will receive $ 2,160

Step-by-step explanation:

The bondholders will get the face value times the bond rate:

In this case:

$ 48,000 principal

9% = 9/100 = 0.09 annual rate = 0.09/2 = 0.045 coupon rate

We divide by 2 as there is two payment per year thus, the principal capitalize for 6 month over a total of 12 between payments.

bonholders payment:

principal x semiannual rate:

$ 48,000 x 0.045 = $ 2,160