Question

On January 1, Forward Company issues bonds that have a $27,000 par value, mature in 6 years, and pay 10% interest per year. Interest payments are paid to bondholders semiannually on June 30 and December 31. How much interest does Forward Company pay to bondholders every six months if the bonds are sold at par

Answer 1

The amount of interest that Forward Company pays to bondholders every six months if the bonds are sold at par is $1,350.

What is bond interest?

The bond interest is the finance expense that Forward Company, the issuer of the bonds, pays to bondholders periodically.

It is computed as the Face value multiplied by the interest rate multiplied by 1/2 if interest is paid semi-annually.

See detailed calculations below.

Data and Calculations:

Face or par value of bonds = $27,000

Interest rate = 10%

Maturity period = 6 yars

Interest payment = semiannually

Interest per semi-annual = $1,350 ($27,000 x 10% x 1/2)

Thus, the amount of interest that Forward Company pays to bondholders every six months if the bonds are sold at par is $1,350.

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