Question

A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?

a) $5,000
b) $6,000
c) $7,000
d) $8,000

Answer 1

The amount of interest the bondholders will receive at the end of the year for a bond with a $100,000 face value and a 6% stated interest rate is $6,000.

Step-by-step explanation:

A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. The amount of interest the bondholders will receive at the end of the year is based on the stated rate of interest, which is 6%. Therefore, the bondholders will receive 6% of the $100,000 face value at the end of each year.

To calculate the interest payment, you use the formula: Interest Payment = Face Value × Stated Interest Rate. So the calculation will be: $100,000 × 0.06 = $6,000. This is the annual interest payment the bondholders will receive.

The correct answer to the question is b) $6,000.