Question

A company issues 10%, 5-year bonds with a par value of $270,000 on January 1 at a price of $280,682, when the market rate of interest was 9%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

Answer 1

$13,500 semiannually

Step-by-step explanation:

The Interest payment of a bond is calculated using the par value and the coupon rate of the bond. It is calculated by multiplying par value with coupon rate of the bond. Premium or Discount is amortized separately and added in the interest expense value.

As per given data

Par value = $270,000

Coupon Rate = 10%

Interest Payment = $270,000 x 10% = $27,000 annually = $13,500

The company pay $13,500 semiannually as interest payment