Blandings Glassware Company issues $1,000,000 of 8%,10-year bonds at 98 on February 28,2015.The bond pays interest on February 28 and August 31.On August 31,2015,how much cash did Blandings pay out to bondholders?

Question

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The bond pays 8% annual interest, which is $80,000 per year ($1,000,000 x 8%). Since interest is paid semi-annually, the payment on August 31, 2015, would be half of the annual interest, which is $40,000.

Blandings Glassware Company Issues $1,000,000 of 8%,10-Year Bonds at 98