Question

A company issues 7% bonds with a par value of $70,000 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

Answer 1

the amount of cash paid as on July 1 to the bond holder is $2,450

Step-by-step explanation:

The computation of the amount of cash paid as on July 1 is shown below:

= Par value × rate of interest × semi-annual basis

= $70,000 × 7% × 6 months ÷ 12 months

= $2,450

Hence, the amount of cash paid as on July 1 to the bond holder is $2,450

We simply applied the above formula so that the correct value could come

And, the same is to be considered