The total interest cost on seventy-eight,ten-year,6 percent,$1,000 bonds that are issued at 98 is
A) $48,360.
B) $45,240.
C) $47,580.
D) $46,800.

Question

Quizplus · Accepted Answer

The total interest cost includes both the cash interest paid and the discount on the bonds. The cash interest is calculated as 78 bonds * $1,000 * 6% * 10 years = $46,800. The discount on the bonds is 2% of $78,000 (78 bonds * $1,000 * 2%) = $1,560. Adding these gives $46,800 + $1,560 = $48,360.

The Total Interest Cost on Seventy-Eight,ten-Year,6 Percent,$1,000 Bonds That Are