Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company.If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?
A) $60,000
B) $120,000
C) $30,000
D) $6,000

Question

Quizplus · Accepted Answer

The total interest paid over the life of the bonds is calculated by multiplying the face value ($100,000) by the annual interest rate (6%), and then by the number of years (10). Since interest is paid semiannually, the annual interest of $6,000 is paid twice a year, resulting in $12,000 paid annually for 10 years, totaling $120,000. However, the question asks for the total amount of interest, not the total payments, which includes the principal. The correct calculation for just the interest is $6,000 * 10 = $60,000.

Bonds in the Amount of $100,000 and a Life of 10