Question

A company issues 7% bonds with a par value of $200,000 at par on January 1. The market rate on the date of issuance was 6%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:

Answer 1

The cash paid to the bondholder on July 1 is Z = $7000

Explanation:

From the question we are told that

The percentage bond issued by the company is
`n = 7`%

The par value of the bond is
`V =`$200,000

The market rate is
`r = 6`%

So we are told that the bonds pay interest semiannually on January 1 and July

So the cash paid to the bondholder on July 1 is mathematically evaluated as

Z =
`V * (7)/(100) * (1)/(2)`

substituting value

Z =
`200000 * (7)/(100) * (1)/(2)`

Z = $7000