Final answer:
The company will receive the maturity value of the bonds which is $40,000 at maturity, despite the purchase price and the broker's fee paid.
"The correct option is approximately option C"
Step-by-step explanation:
When a company acquires bonds, the intention is often to hold them until maturity, at which point the company will receive the maturity value of the bonds. In the scenario presented, a company paid $37,800 plus a broker's fee of $525 for 8% bonds with a $40,000 maturity value. The question we're addressing is: What will the cash proceeds be for the company when these bonds mature?
The answer is quite straightforward. The company will receive the maturity value of the bonds regardless of what they paid to acquire them, as long as the bonds are held to maturity and the issuer does not default. Therefore, the cash proceeds the company will receive upon maturity of the bonds will be $40,000. This is the face value of the bonds that the issuer agreed to pay back once the bonds reach their maturity.
Broker's fees and the price paid to acquire the bonds are irrelevant to the maturity value, which is why the correct answer to this question is $40,000. Broker's fees and acquisition costs are considered when calculating the yield of the bond investment, but they do not affect the actual repayment value at maturity.