Adonis Corporation issued 10-year, 11% bonds with a par value of $270,000. Inter

Question

Adonis Corporation issued 10-year, 11% bonds with a par value of $270,000. Interest is paid semiannually. The market rate on the issue date was 10%. Adonis received $286,827 in cash proceeds. Which of the following statements is true?

a) Adonis must pay $286,827 at maturity and no interest payments.
b) Adonis must pay $270,000 at maturity and no interest payments.
c) Adonis must pay $270,000 at maturity plus 20 interest payments of $13,500 each.
d) Adonis must pay $286,827 at maturity plus 20 interest payments of $14,850 each.
e) Adonis must pay $270,000 at maturity plus 20 interest payments of $14,850 each.

Explanation / Answer

d) Adonis must pay $270,000 at maturity plus 20 interest payments of $14,850 each.

Interest payment = $270,000 * 11% * 1/2 = $14,850

As it is semiannual payment the payment will be 20(10 * 2)

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