On January 1,Bank,Rupp & Baroque,Inc.issued $50,000 worth of 10-year,9% bonds for $48,890.What is the amount of the first year's interest payment?

Question

Quizplus · Accepted Answer

The annual interest payment can be calculated using the formula:

Annual interest payment = face value of bond x coupon rate

In this case, the face value of the bond is $50,000 and the coupon rate is 9%.

So, annual interest payment = $50,000 x 0.09 = $4,500

Since the bond was issued on January 1, the first interest payment will be due at the end of the year. Therefore, the amount of the first year's interest payment will also be $4,500.

The only choice that matches this answer is A.