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vlada-n [284]
2 years ago
10

On January 1, 2019, $40 million face amount of 5%, 20-year bonds were issued. The bonds pay interest on a semiannual basis on Ju

ne 30 and December 31 each year. The market interest rates were slightly higher than 5% when the bonds were sold. How much interest will be paid semiannually (each year on June 30 and on December 31) on these bonds?
Business
1 answer:
Karo-lina-s [1.5K]2 years ago
4 0

Answer:

$1 million or $1,000,000

Explanation:

The interest payment on the bonds is based on the face value of the bond and coupon interest rate of the bond. If interest is paid semiannually the coupon annual rate should also be calculated for 6 months to calculate the semiannual payment.

As per given data

Face value = $40 million

Coupon Rate = 5% annually

Coupon rate = 5% / 2 = 2.5% semiannually

Semiannual payment of interest = Face value x Coupon rate

Semiannual payment of interest = $40 million x 2.5%

Semiannual payment of interest = $1 million

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Answer:

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Explanation:

The cost of debt is the interest a company pays on its borrowings. It is expressed as a percentage rate. Also, the cost of debt can be calculated as a before-tax rate or an after-tax rate. Before interest is deductible for income taxes, the cost of debt is usually expressed as an after-tax rate.

7 0
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The use of debt in the firm's capital structure will increase ROE if the firm:_____.
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Explanation:

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scoundrel [369]

Answer:

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hope this helps

6 0
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