Question

Blue Spruce Corp. issued 3,300 5%, 9-year, $1,000 bonds dated January 1, 2025, at face value. When is interest paid?

a) Each January 1
b) Each July 1
c) Semi-annually
d) Annually

Answer 1

Interest on the Blue Spruce Corp. bonds is paid annually, as no other payment frequency is mentioned in the question.

Step-by-step explanation:

The question concerns the payment schedule of bond interest from Blue Spruce Corp., which has issued 3,300 5%, 9-year, $1,000 bonds dated January 1, 2025, at face value. Normally, unless otherwise specified in the terms of the bond, a bond with an annual interest rate will pay its interest annually.

Since there is no mention of the payment frequency in the question, we would assume that the interest is paid once a year. Thus, the correct answer is d) Annually. In the context of the example provided where Ford Motor Company issues a bond that pays an annual coupon payment, it further supports the assumption that without mention of a different arrangement, interest payments are made annually.