A five-year bond with a maturity value of $900,000 and a stated interest rate of 8% initially sold for $879,000;total interest expense during the five-year life of the bond will be $339,000.

Question

Quizplus · Accepted Answer

We can use the formula for calculating interest expense on a bond:
Interest expense = Maturity value x Stated interest rate x Time

Plugging in the given values, we get:
Interest expense = $900,000 x 8% x 5 years = $360,000

This is different from the given total interest expense of $339,000. Therefore, the statement is false.

A Five-Year Bond with a Maturity Value of $900,000 and a Stated