On 1 June 2017,Smith Services issued $38,000 of 10% debentures that mature in five years.They were sold at par.The debentures pay semiannual interest payments on 30 June and 31 December of each year.On 31 December 2017,how much is the total interest payments made to investors?
A)$1266.67
B)$3800.00
C)$950.00
D)$1900.00

Question

Quizplus · Accepted Answer

The total interest payment for the year is calculated by taking the principal amount ($38,000) and multiplying it by the annual interest rate (10%), then dividing by 2 for the semiannual payment. This results in $1,900 per payment, and since there are two payments by 31 December 2017, the total is $3,800.

On 1 June 2017,Smith Services Issued $38,000 of 10% Debentures