On January 1,2013,Davie Services Issued $20,000 of 8% Bonds That

question 94

Multiple Choice

On January 1,2013,Davie Services issued $20,000 of 8% bonds that mature in five years.They were sold at par.The bonds pay semiannual interest payments on June 30 and December 31 of each year.On June 30,2013,how much are the total interest payments made to bondholders?

• A) $800.00
• B) $1,600.00
• C) $160.00
• D) $133.33

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Definitions:

Growing Annuity

A series of cash flows that grow at a constant rate for a finite number of periods.

Cash Flow Growth Rate

The rate at which a company's cash flow increases over a certain period, reflecting financial health and profitability potential.

Required Rate of Return

The minimum yearly percentage profit necessary for persuading individuals or corporations to invest in a particular security or initiative.

APR

The Annual Percentage Rate, a measure of the total cost of credit to the borrower on an annual basis, including interest and transaction fees.