Question

On September 1, , Expert Materials, issued at 98 plus accrued interest, $800,000 of its 10% bonds. The bonds are dated June 1, 2021, and mature on May 30, 2029. Interest is payable semiannually on June 1 and December 1. At the time of issuance, Expert would receive cash of:

Answer 1

Expert should receive cash of $2.412 billion

Explanation:

On September 1, , Expert Materials, issued 3000 bonds at 98 plus accrued interest, $800,000 of its 10% bonds. The bonds are dated June 1, 2021, and mature on May 30, 2029. Interest is payable semiannually on June 1 and December 1. At the time of issuance, Expert would receive cash of:

The amount received is the price of the bonds plus interest from June 1 ( the day the bonds are dated) to September 1 (the date the bonds are issued)

Amount received = accrued interest(number of bonds)(value of bonds) + bond rate(period)(number of bonds)(value of bonds)

Given that:

accrued interest = 98% = 0.98

number of bonds = 3000

value of bonds = $800000

period = June to September = 3 months = 3/12 years

rate of bonds = 10% = 0.1

Amount received = 0.98(3000)($800000) + 0.10(3/12 year)(3000)($800000) = $2412000000 = $2.412 billion

Expert should receive cash of $2.412 billion