The Amazing Widget Company Issues $500 000 of 6%, 10-

question 55

Multiple Choice

The Amazing Widget Company issues $500 000 of 6%, 10- year debentures at 103 on 31 March 2013. The debenture pays interest on 31 March and 30 September. The market rate of interest on the issue date was 4%. On 30 September 2013, how much cash did the company pay out to debenture holders?

• A)$14 250
• B)$7 500
• C)$15 000
• D)$30 000

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Definitions:

Projected Benefit Obligation

The present value of a retirement plan's benefits owed to employees, calculated based on estimated salary increases.

Plan Assets

Investments and other assets set aside by an employer to fund pension benefits or other retirement plans for its employees.

Projected Benefit Obligation

An actuarial estimate of the total value of future pension benefits owed to employees, based on their service and salary history, to be paid by a pension plan.

Pension Plan Assets

The resources set aside by a company to meet future pension obligations to retirees, usually in the form of investments.