Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 34%?
A) $58,500
B) $60,100
C) $60,750
D) $61,200
E) $62,250

Question

Quizplus · Accepted Answer

The annual interest is calculated as 2,000 bonds * $1,000 * 9% = $180,000. The tax shield is the interest * tax rate, so $180,000 * 34% = $61,200.

Bertha's Boutique Has 2,000 Bonds Outstanding with a Face Value