Company sells $5,000,000 of five-year, 10% bonds at the start of the year. The bonds have an effective yield of 9%. Present value factors are below: 10% 9% PV $1 factor 1 year 0.90909 0.91743 PV $1 factor 2 years 0.82645 0.84168 PV $1 factor 3 years 0.75131 0.77218 PV $1 factor 4 years 0.68301 0.70843 PV $1 factor 5 years 0.62092 0.64993 The amount of cash interest paid in Year 1 on the bonds is: Multiple Choice $538,895.
Company sells $5,000,000 of five-year, 10% bonds at the start of the year. The bonds have an effective yield of 9%. Present value factors are below: 10% 9% PV $1 factor 1 year 0.90909 0.91743 PV $1 factor 2 years 0.82645 0.84168 PV $1 factor 3 years 0.75131 0.77218 PV $1 factor 4 years 0.68301 0.70843 PV $1 factor 5 years 0.62092 0.64993 The amount of cash interest paid in Year 1 on the bonds is: Multiple Choice $538,895.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
100%
The Ness Company sells $5,000,000 of five-year, 10% bonds at the start of the year. The bonds have an effective yield of 9%.
| 10% | 9% | |
| PV $1 factor 1 year | 0.90909 | 0.91743 |
| PV $1 factor 2 years | 0.82645 | 0.84168 |
| PV $1 factor 3 years | 0.75131 | 0.77218 |
| PV $1 factor 4 years | 0.68301 | 0.70843 |
| PV $1 factor 5 years | 0.62092 | 0.64993 |
The amount of cash interest paid in Year 1 on the bonds is:
Multiple Choice
-
$538,895.
-
$500,000.
-
$450,000.
-
$467,503.
Expert Solution
Step 1
Cash interest refers to the amount of interest that is paid to creditors.To put it another way, it refers to the amount of interest that has been settled.The interest expense, on the other hand, is the total interest expense of the firm.It is the total amount owing for a specific financial period.
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