Question

A company paid $43,800 plus a broker's fee of $675 to acquire 7% bonds with a $46,000 maturity value. the company intends to hold the bonds to maturity. the cash proceeds the company will receive when the bonds mature equal:

Answer 1

When the bonds will mature, the company will receive, maturity value plus the interest earned on the bonds.

The maturity value will be the par value, as nothing is given, the bonds are redeemed at par value i.e. $ 46,000.

The interest income will be calculated as -

Interest Income = 7 % * $ 46,000 = $ 3,220

Thus, the total cash proceeds = $ 46,000 + $ 3,220 = $ 49,220