Answer:Interest payment = $1,350,000, Total cash paid = $57,000,000
Explanation:
Coupon Face value = $30,000,000, coupon interest rate = 9% = 9÷100 = 0.09, period = 10 years since the payment is semi - annually , period is multiplied by 2 = 10 ×2 =20, semi annually = 6/12
To calculate the interest payment, we use the formula
Face value of the bond × coupon interest rate × semi- annual payment
= 30,000,000 × 0.09 × 6/12
= $1,350,000
To calculate the total cash paid to investors over the life of the bond, we use
Interest payment × period
Since period = 20
1,350,000 × 20
= $27,000,000
Therefore the total cash paid = $30,000,000 + $27,000,000
= $57,000,000
Campbell Inc receive a premium more cash than the principal amount from the purchaser .The purchaser is willing to pay more because the purchaser of the bond will receive interest payment of $1,350,000
