If a $6,000, 10 percent, 10-year bond was issued at 106 on October 1, how much will accrued interest payable be on December 31 if interest payments are made annually? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The annual interest on a $6,000 bond at 10 percent is $600. Since interest is paid annually and we're looking at the interest accrued from October 1 to December 31, this represents 3 months or a quarter of a year. Therefore, the accrued interest is 1/4 of the annual interest: $600 * 1/4 = $150. The issue price of the bond (106% of face value) does not affect the calculation of accrued interest.

If a $6,000, 10 Percent, 10-Year Bond Was Issued at 106