Question

Worcester company issues bonds with face value $10 million at the price of $9.5 million on January 1, 2019. The bonds have a five-year term and pay interest semiannually on June 30 and December 31 each year. The stated interest rate is 4%. The market interest rate is 5%. What will be the total interest expense for the company in 2019?

Answer 1

The total interest expense for Worcester company in 2019 would be $400,000.

Step-by-step explanation:

The total interest expense for Worcester company in 2019 can be calculated by multiplying the face value of the bonds by the stated interest rate. The face value of the bonds is $10 million and the stated interest rate is 4%. Therefore, the total interest expense for the company in 2019 would be $10 million multiplied by 4%, which is $400,000.