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

question 40

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. 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:

Coupon Interest Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value.

Market Interest Rate

The prevailing rate of interest available in the market on loans, bonds, and other financial instruments.

Semi-Annual

Occurring twice a year, typically every six months.

Long-Term Notes

Debt securities with a maturity date longer than one year, representing borrowed funds that need to be repaid.