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26 June, 13:46

A company issues 9%, 7-year bonds with a par value of $260,000 on January 1 at a price of $273,732, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is: Multiple Choice $23,400. $20,800. $11,700. $10,400. $0.

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  1. 26 June, 15:50
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    Semi-annual interest = $11,700

    Explanation:

    The semi annual interest = coupon rate * nominal value * 1/2

    = 9% * 260,000 * 1/2

    =$11,700

    The interest has to be pro rated into two to account for 6 months
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