The Amazing Widget Company Issues $500,000 of 6%,10-Year Bonds at 103

question 17

Multiple Choice

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

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

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Definitions:

Fixed Cost

Expenses that do not change with the level of output produced, such as rent, salaries, and insurance premiums.

Patent

A legal grant by a government to an inventor, giving the right to exclude others from making, using, or selling an invention for a certain number of years.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, remaining constant regardless of business activity volume.

Patent

A legal document granting an inventor exclusive rights to manufacture, use, or sell an invention for a certain number of years.