Question

On July​ 1, 2018, Mason​ & Beech Services issued $ 33,000 of 10​% bonds that mature in five years. They were issued at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December​ 31, 2018, what is the total amount paid to​ bondholders?

Answer 1

$1,650

Step-by-step explanation:

The computation of the total amount paid to bondholders is shown below:

= Issued amount × rate of interest × number of months ÷ (total number of months in a year)

= $33,000 × 10% × (6 months ÷ 12 months)

= $1,650

The six months are calculated from June 30 to December 31. And, we simply use the simple interest formula so that the correct amount can come.