A company issued 10-year,8% bonds with a face value of $200,000.Interest is paid annually.The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds.Which of the following statements is correct?
A)The company must pay $184,000 at maturity plus $16,000 in interest each year for 10 years.
B)The company must pay $206,948 at maturity plus $15,000 in interest each year for 10 years.
C)The company must pay $200,000 at maturity plus $16,000 in interest each year for 10 years.
D)The company must pay $200,000 at maturity plus $15,000 in interest each year for 10 years.

Question

Quizplus · Accepted Answer

Annual interest payments = Face value × Stated interest rate × Time
= $200,000 × 0.08 × 12 / 12 = $16,000
The company would pay the face value of the bond at maturity of $200,000 plus ten annual interest payments of $16,000.

A Company Issued 10-Year,8% Bonds with a Face Value of $200,000.Interest