On January 1, 2013, Boston Enterprises issues bonds that have a $2,200,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months?

On January 1, 2013, Boston Enterprises issues bonds that have a $2,200,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par.

 

Explanation:

1.

Semiannual cash interest payment = $2,200,000 × 9% × 1/2 = $99,000

 

3.

(a) Sold bonds at 96 ($2,200,000 × 0.96) = $2,112,000

(b) Sold bonds at 104 ($2,200,000 × 1.04) = $2,288,000