Question

A company issues 7% bonds with a par value of $200,000 at par on January 1. The market rate on the date of issuance was 6%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:

Answer 1

Answer:

The cash  paid to the bondholder on July 1 is    Z =  $7000

Step-by-step explanation:

From the question we are told that

  The percentage bond issued by the company is $n = 7$%

    The par value of the bond is $V =$$200,000

     The market rate is $r = 6$%

So we are told that the bonds pay interest semiannually on January 1 and July

So the cash  paid to the bondholder on July 1 is mathematically evaluated as

Z =  $V * \frac{7}{100} * \frac{1}{2}$        

substituting value

   Z =  $200000 * \frac{7}{100} * \frac{1}{2}$  

      Z =  $7000