Question

Morgan Company issues 10%, 20-year bonds with a par value of $760,000 that pay interest semiannually. The current market rate is 9%. The amount paid to the bondholders for each semiannual interest payment is: Multiple Choice $34,200. $380,000. $38,000. $68,400. $76,000.

Answer 1

c. $38,000

Step-by-step explanation:

Bond is issued at i= 10% = 0.10, n=20, m= 2, p= $760,000

The amount of interest owed to the bondholders for each semiannual interest payment is:

= $760,000 × 0.10 × 6/12

= $760,000 x 0.05

= $38,000