Asked by abdualrahman alhajri on Apr 28, 2024
Verified
Adonis Corporation issued 10-year,8% bonds with a par value of $200,000.Interest is paid semiannually.The market rate on the issue date was 7.5%.Adonis received $206,948 in cash proceeds.Which of the following statements is true?
A) Adonis must pay $200,000 at maturity and no interest payments.
B) Adonis must pay $206,948 at maturity and no interest payments.
C) Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D) Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E) Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
Cash Proceeds
The total amount of cash received from a transaction, such as the sale of an asset or a business operation.
Market Rate
The prevailing price or interest rate for goods, services, or securities in a particular market at a given time.
Interest Payments
Regular payments made to lenders as compensation for borrowing money, typically calculated as a percentage of the principal.
- Document the ledger entries concerning bond issuance, interest dispensation, and bond cessation.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
C
Explanation :
Adonis must pay the par value of $200,000 at maturity. Since the bonds are 8% with semiannual payments on a $200,000 par value, the interest payment every six months is $8,000 (0.08 * $200,000 = $16,000 annually, divided by 2). There are 20 interest payments over the 10-year period.
Learning Objectives
- Document the ledger entries concerning bond issuance, interest dispensation, and bond cessation.