A Company Issued 5-Year,7% Bonds with a Par Value of $100,000.The

question 64

Multiple Choice

A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the straight-line method,the amount of recorded interest expense for the first semiannual interest period is:

• A)$3,289.50.
• B)$3,500.00.
• C)$3,613,70.
• D)$6,633.70.
• E)$7,000.00.

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Definitions:

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer.

Annual Coupon Bond

A bond that pays interest to the holder on an annual basis, typically as a fixed percentage of its face value.

Face Value

The original cost of a financial instrument as stated on the certificate or document, not influenced by the market price.

Maturity

The date on which a financial instrument, such as a bond or loan, reaches its due date and the principal amount must be repaid.