Question

A company issues 6% bonds with a par value of $80,000 at par on January 1. The market rate on the date of issuance was 5%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:

Answer 1

$2400

Step-by-step explanation:

Answer 2

$2,400.

Step-by-step explanation:

The company issues 6% bonds with a par value of $80,000 which pay interest semi-annually.

First we'll calculate the yearly interest accumulated on the bonds.

$80,000 * 6% = $4,800

To calculate the semi-annual interest paid,

$4,800 / 2 = $2,400

The cash paid on July 1 to the bond holder(s) is $2,400