On July 1, 2018, Mason & Beech Services issued $48,000 of 9 % bonds that mature in five years. They were issued at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31, 2018, what is the total amount paid to bondholders?

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Business

Cristofer Flores

17 August, 10:06

On July 1, 2018, Mason & Beech Services issued $48,000 of 9 % bonds that mature in five years. They were issued at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31, 2018, what is the total amount paid to bondholders?

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Lindsay Warren · Answer 1

December 31th, 2018 the bondholder will receive $ 2,160

Explanation:

The bondholders will get the face value times the bond rate:

In this case:

$ 48,000 principal

9% = 9/100 = 0.09 annual rate = 0.09/2 = 0.045 coupon rate

We divide by 2 as there is two payment per year thus, the principal capitalize for 6 month over a total of 12 between payments.

bonholders payment:

principal x semiannual rate:

$ 48,000 x 0.045 = $ 2,160