1)A company purchased $108,000 of 6% bonds on May 1 at par value. The bonds pay
ID: 2336824 • Letter: 1
Question
1)A company purchased $108,000 of 6% bonds on May 1 at par value. The bonds pay interest on March 1 and September 1. The amount of interest accrued on December 31 (the company's year-end) would be:
Multiple Choice
$2,160.
$5,400.
$1,080.
$2,700.
$3,240.
2)
A company purchased $108,000 of 6% bonds on May 1 at par value. The bonds pay interest on March 1 and September 1. The amount of interest accrued on December 31 (the company's year-end) would be:
Multiple Choice
$2,160.
$5,400.
$1,080.
$2,700.
$3,240.
3)
A company paid $38,800 plus a broker's fee of $550 to acquire 7% bonds with a $41,000 maturity value. The company intends to hold the bonds to maturity. The cash proceeds the company will receive when the bonds mature equal:
Multiple Choice
$38,800.
$43,870.
$41,000.
$41,550.
$39,350.
Explanation / Answer
Solution 1)
Amount of interest accrued = $108,000 x 6% x 4 /12
= $2,160
Solution 2) ( same as ques. No. 1)
Amount of interest accrued = $108,000 x 6% x 4 /12
= $2,160
Solution 3)
Cash proceeds the company will receive
= $41,000 + $41,000x 7%
= $43,870
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