Question 24 1 pts On January 1, Bulldozer Construction issued bonds with a face

Question

Question 24 1 pts On January 1, Bulldozer Construction issued bonds with a face amount of $575,000. The bonds pay interest semi-annually and mature in 8 years. Because the market rate of interest differed from the contract rate of interest, the amount of cash that Bulldozer received from the sale was $585,000. The bonds are not callable. How many interest payments will Bulldozer make over the life of these bonds, and what will be amortized with each payment? [Read selections carefully. You must determine if Bulldozer will be amortizing a discount or a premium.] O 8 interest payments, $1,000 of the discount amortized with each payment O 16 interest payments, $5625 of the discount amortized with each payment O 8 interest payments, $1.000 of the premium amortized with each payment 16 interest payments, $625 of the premium amortized with each payment

Explanation / Answer

Q24 Last option given is correct. The bond issuance will result in 16 interest payments (2*8) and $ 625 (10000/16) will be amortized with each semi annual payment.

The bond is issued at premium as the issuance price is higher than face amount. Bonds pays interest semi-annualy so premium received will be amortized in 16 times (8*2).

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