Morgan Company issues 9%,20-year bonds with a par value of $750,000 that pay interest semi-annually.The current market rate is 8%.The amount of interest owed to the bondholders for each semiannual interest payment is:
A)$60,000.
B)$33,750.
C)$67,500.
D)$30,000.
E)$375,000.

Question

Quizplus · Accepted Answer

The bond pays a 9% annual interest rate semi-annually, which means the semi-annual coupon payment is 4.5% of $750,000, or $33,750. This is the interest owed to bondholders for each semiannual interest payment.

Morgan Company Issues 9%,20-Year Bonds with a Par Value of $750,000