Paris Company issued bonds in the amount of $500,000 with a stated interest rate of 8%. If the interest is paid semiannually and the bonds are due in 10 years, what would be the total amount of interest paid over the life of the bonds?

Question

Quizplus · Accepted Answer

The bonds have a stated interest rate of 8%, which means that the company must pay $40,000 in interest each year (8% of $500,000). Since the interest is paid semiannually, the company pays $20,000 at the end of each 6-month period.

Over the life of the bonds, there will be 20 semiannual interest payments (10 years x 2 payments per year). Therefore, the total amount of interest paid will be:

$20,000 x 20 = $400,000.

Therefore, the best choice is (C).

Paris Company Issued Bonds in the Amount of $500,000 with a Stated