A company has an investment in 9% bonds with a par value of $100,000 that pay interest on October 1 and April 1.The amount of interest accrued on December 31 (the company's year-end)would be:
A)$750.
B)$1,500.
C)$2,250.
D)$4,500.
E)$9,000.

Question

Quizplus · Accepted Answer

The interest payment is made on October 1 and April 1. Therefore, on December 31, three months of interest would have accrued (from October 1 to December 31). 
The annual interest rate is 9%, so for a $100,000 bond, the annual interest payment would be $9,000 ($100,000 x 9%). 
Dividing this by two gives the semi-annual payment of $4,500 ($9,000/2). 
Dividing by 6 gives the 3-month accrued interest of $2,250 ($4,500/6).

A Company Has an Investment in 9% Bonds with a Par