Adonis Corporation issued 10-year, 9% bonds with a par value of $260,000. Intere

Question

Adonis Corporation issued 10-year, 9% bonds with a par value of $260,000. Interest is paid semiannually. The market rate on the issue date was 8%. Adonis received $277,671 in cash proceeds. Which of the following statements is true?

A.) Adidas must pay $277,671 at maturity and no interest payments.

B.) Adidas must pay $260,000 at maturity plus 20 interest payments of $11,700 each.

C.) Adidas must pay $260,000 at maturity plus 20 interest payments of $10,400 each.

D.) Adidas must pay $277,671 at maturity plus 20 interest payments of $11,700 each.

E.) Adidas must pay $260,000 at maturity and no interest payments.

Adonis Corporation issued 10-year, 9% bonds with a par value of $260,000. Interest is paid semiannually. The market rate on the issue date was 8%. Adonis received $277,671 in cash proceeds. Which of the following statements is true?

Explanation / Answer

B.) Adidas must pay $260000 at maturity plus 20 interest payments of $11700 each.

INTEREST PAYMENT = 260000*9%

=23400/2 HALF YEARLY INSTALLMENTS

= $11700 (20 INSTALLMENTS)

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