Question

A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

Answer 1

Answer:

The amount of each semiannual interest payment is $4500.

Explanation:

The amount of each semiannual interest payment

= 100000*9%*6/12

= $4500

Therefore, the amount of each semiannual interest payment is $4500.

Answer 2

Answer:

$4500 is the semiannual interest payment.

Explanation:

The annual interest rate is given as 9% and the bond has a par value of $100,000.

To calculate the semiannual interest payment which the buyer will receive twice a year is:

=($100,000*9%)/2

=$4500

The annual interest rate is 9% so we need to divide it by 2 to get semiannual interest rate.