Question

On April​ 1, 2018, Ellucian Corporation invested in the bonds issued by the City of Westminster on January​ 1, 2018. These 10minus​year, $ 400 comma 000 bonds pay interest of 2​% with semiannual payments every June 30 and December 31. Ellucian paid par value plus accrued interest. What is the total amount paid by Ellucian for the City of Westminster​ bonds?

Answer 1

$402,000

Step-by-step explanation:

The computation of the total amount paid is shown below:

Total amount paid = Face value + accrued interest

where,

Face value of the bond is $400,000

And, the accrued interest is

= $400,000 × 2% × 3 months ÷ 12 months

= $2,000

The 3 months is calculated from April 1 to June 30

So, the total amount paid i s

= $400,000 + $2,000

= $402,000

We added the face value and the accrued interest to determine the total amount paid