Question

A company issues 7%, 8-year bonds with a par value of $110,000 on January 1 at a price of $118,359, when the market rate of interest was 6%. The bonds pay

Interest semiannually. The amount of each semiannual interest payment is:

Answer 1

Each semiannual interest payment for the bond is $3,850, calculated by taking 7% of the par value, which is the annual interest, and dividing by 2 for the semiannual payments.

Step-by-step explanation:

The amount of each semiannual interest payment for a company's 7%, 8-year bonds with a par value of $110,000 can be calculated by taking 7% of $110,000 to determine the annual interest, and then dividing by 2 since the interest is paid semiannually. To find the annual interest, multiply the par value ($110,000) by the interest rate (7%), which equals $7,700. Then, divide $7,700 by 2 to find the semiannual payment, which is $3,850.