Question

A company issues 9% bonds with a par value of $50,000 at par on January 1. The market rate on the date of issuance was 8%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:_______

a. $2,250.
b. $54,500.
c. $52,000.
d. $0.
e. $4,000.

Answer 1

a. $2,250.

Step-by-step explanation:

Calculation for The cash paid on July 1 to the bond holder(s)

Using this formula

Cash paid on July 1 = Bond par value*Rate*Time

Let plug in the formula

Cash paid on July 1 = 50,000*9%*6/12

Cash paid on July 1 = $2,250

ThereforeThe cash paid on July 1 to the bond holder(s) is:$2,250