Question

On January 1, 2017, Boston Enterprises issues bonds that have a $2,050,000 par value, mature in 20 years, and pay 8% 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

Answer 1

Answer:

Boston will  pay (in cash) to the bondholders every six months $125,146.31.

Explanation:

The interest paid in cash PMT, can be calculated as follows :

PV = $2,050,000

N = 20 × 2 = 40

R = 8%

FV = $2,050,000

P/yr = 2

PMT = ?

Using a financial calculator to enter the above data concerning the bond, the payments (PMT) every six months is $125,146.3062 or $125,146.31.