The amount of cash received on issuance of a 9 percent,$10,000 bond dated February 1 and issued June 1 at 102 1/2 is
A)$10,300.
B)$11,100.
C)$10,200.
D)$10,550.

Question

Quizplus · Accepted Answer

To calculate the amount of cash received on issuance, we need to start by determining the face value of the bond, which is $10,000.

The bond was issued on June 1, which means that interest has accrued for four months (February, March, April, and May). The bond has a stated interest rate of 9%, so we can calculate the interest accrued as follows:

$10,000 x 0.09 x (4/12) = $300

Therefore, the total value of the bond at issuance is:

$10,000 + $300 = $10,300

The bond was issued at 102 1/2, which means that the buyer paid 102.5% of the face value. To calculate the price paid for the bond, we multiply the face value by the price:

$10,300 x 1.025 = $10,552.50

Therefore, the amount of cash received on issuance was $10,552.50.

The closest option is D) $10,550.

The Amount of Cash Received on Issuance of a 9