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A company issues 7% bonds with a par value of $200,000 at par on January 1. The market rate on the date of issuance was 6%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:

User Divyum
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1 Answer

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Answer:

The cash paid to the bondholder on July 1 is Z = $7000

Explanation:

From the question we are told that

The percentage bond issued by the company is
n = 7%

The par value of the bond is
V =$200,000

The market rate is
r = 6%

So we are told that the bonds pay interest semiannually on January 1 and July

So the cash paid to the bondholder on July 1 is mathematically evaluated as

Z =
V * (7)/(100) * (1)/(2)

substituting value

Z =
200000 * (7)/(100) * (1)/(2)

Z = $7000

User Snapcrack
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