Adonis Corporation issued 10-year,8% bonds with a par value of $200,000.Interest is paid semiannually.The market rate on the issue date was 7.5%.Adonis received $206,948 in cash proceeds.Which of the following statements is true?
A)Adonis must pay $200,000 at maturity and no interest payments.
B)Adonis must pay $206,948 at maturity and no interest payments.
C)Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D)Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E)Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

Question

Quizplus · Accepted Answer

Adonis must pay the par value of $200,000 at maturity. Since the bonds are 8% with semiannual payments, the interest payment is 8% of $200,000 divided by 2, which equals $8,000 every six months for 10 years, totaling 20 payments.

Adonis Corporation Issued 10-Year,8% Bonds with a Par Value of $200,000.Interest