The Amazing Widget Company issues $500 000 of 6%, 10- year debentures at 103 on 31 March 2013. The debenture pays interest on 31 March and 30 September. The market rate of interest on the issue date was 4%. On 30 September 2013, how much cash did the company pay out to debenture holders?
A)$14 250
B)$7 500
C)$15 000
D)$30 000

Question

Quizplus · Accepted Answer

The company pays interest semi-annually at a rate of 6% per annum on $500,000. Therefore, each payment is ($500,000 * 6%)/2 = $15,000.

The Amazing Widget Company Issues $500 000 of 6%, 10-