Asked by unknown person on Apr 28, 2024
Verified
Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semiannually.The amount paid to the bondholders for each semiannual interest payment is.
A) $60,000.
B) $33,750.
C) $67,500.
D) $30,000.
E) $375,000.
Semiannual Interest
Interest that is calculated and paid twice a year on investments or loans.
Par Value
The nominal or face value of a stock or bond, which is the amount stated on the certificate or instrument.
Bondholders
Individuals or institutions that hold the debt securities issued by corporations or governments, entitled to receive the bond's face value at maturity and periodic interest payments.
- Understand the methodology behind calculating interest and the payment systems for bonds.
Verified Answer
KL
Kristy LippertApr 30, 2024
Final Answer :
B
Explanation :
The semiannual interest payment can be calculated as follows:
(Par value of bond x Annual interest rate)/2
= ($750,000 x 9%)/2
= $33,750
Therefore, the amount paid to bondholders for each semiannual interest payment is $33,750, which is option B.
(Par value of bond x Annual interest rate)/2
= ($750,000 x 9%)/2
= $33,750
Therefore, the amount paid to bondholders for each semiannual interest payment is $33,750, which is option B.
Learning Objectives
- Understand the methodology behind calculating interest and the payment systems for bonds.