Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The current market rate is 8%. The amount paid to the bondholders for each semiannual interest payment is:
A) $375,000.
B) $67,500.
C) $33,750.
D) $60,000.
E) $30,000.

Question

Quizplus · Accepted Answer

To calculate the semiannual interest payment, we use the formula:
Semiannual Interest Payment = (Par Value x Coupon Rate) / 2
= ($750,000 x 9%) / 2
= $33,750
Therefore, the amount paid to the bondholders for each semiannual interest payment is $33,750.

Morgan Company Issues 9%, 20-Year Bonds with a Par Value