Question

Morgan company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semi-annually. the current market rate is 8%. the amount of interest owed to the bondholders for each semiannual interest payment is:

Answer 1

The amount of interest owed to the bondholders for each payment is $33,750. The amount interest to the bondholders for each payment should be calculated with this formula: Interest Yield Rate x Face Value of Bond x Time (9% x $750,000 x 1/2). The market interest rate of 8% has no effect on the interest payment calculation but it impacted the bond market value.