Question

The current carrying value of Quail's $340,000 face value bonds is $327,300. If the bonds are retired at 103, what would be the amount Quail would pay its bondholders?

A: $350,200
B: $360,300
C: $337,119
D: $374,000

Answer 1

Quail would pay its bondholders $350,200 when retiring its $340,000 face value bonds at 103% of the face value, which is option A.

The student's question is related to bond retirement in the context of business finance. When a company retires its bonds, it essentially buys them back from the bondholders at a pre-specified price. In this case, Quail is retiring its bonds at 103, meaning 103% of the face value. To calculate the amount paid to bondholders, we use the face value of the bonds:

• Multiply the face value ($340,000) by the retirement percentage (103%), denoted as 1.03.
• The calculation yields $340,000 x 1.03 = $350,200.

Therefore, the amount paid to bondholders upon retirement will be $350,200, corresponding to option A.