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As of today, the carrying value of a bond was $ 247,358 and the face value of the bond was $791,981. The effective interest rate was 13% while the contract rate of interest was 3% with interest payments semiannually on June 30 and December 31. Rounding to the nearest dollar, what is the interest payment made to the bondholder on June 30?

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Final answer:

The interest payment on June 30 for the bond with a face value of $791,981 and a 3% contract rate is $11,880, after rounding to the nearest dollar.

Step-by-step explanation:

The question involves calculating the interest payment for a bond given certain financial details, specifically the contract rate of interest and the face value. The contract rate of interest affects the semiannual interest payment, but not the carrying or market value of the bond, which is calculated with the effective interest rate.

To calculate the semiannual interest payment due on June 30, we use the face value of the bond and the contract rate of interest. The annual interest payment is found by multiplying the face value ($791,981) by the contract rate (3%), and then the result is divided by 2 to account for the semiannual payment schedule:

Annual interest payment = $791,981 × 3% = $23,759.43

Semiannual interest payment = $23,759.43 / 2 = $11,879.72

Therefore, rounding to the nearest dollar, the interest payment made to the bondholder on June 30 is $11,880.

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