Question

Brown Co. issued $100 million of its 10% bonds on April 1, 2016, at 99 plus accrued interest. The bonds are dated January 1, 2016, and mature on December 31, 2035. Interest is payable semiannually on June 30 and December 31. What amount did Brown receive from the bond issuance?
a) $87.8 million
b) $99.0 million
c) $100.0 million
d) $101.5 million

Answer 1

Answer:

d) $101.5 million

Explanation:

The computation of the amount received from the bond issuance is given below:

Interest Rate: 10%

Time period: 3 months (from 01.01.2016 to 31.03.2016)

Par Value=$100 million

Accrued Interest be 2.53 million

So,  

Amount receive from Bond Issuance is

= 99 + 2.53

= $101.5 million