Johnson Corporation plans to obtain financing with a $1,000,000 bond issue that has a term of 10 years. Payments will be made semi-annually. If the bond (payment) rate is stated at 7%, and the bonds call for semi-annual payments, what is the amount of those payments? O a. $350,000 O b. $70,000 Oc $35,000 d. $700,000
Johnson Corporation plans to obtain financing with a $1,000,000 bond issue that has a term of 10 years. Payments will be made semi-annually. If the bond (payment) rate is stated at 7%, and the bonds call for semi-annual payments, what is the amount of those payments? O a. $350,000 O b. $70,000 Oc $35,000 d. $700,000
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
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Johnson Corporation plans to obtain financing with a $1,000,000 bond issue that has a term of 10 years. Payments wilI be made semi-annually.
if the bond (payment) rate is stated at 7%, and the bonds call for semi-annual payments, what is the amount of those payments?
O a. $350,000
O b. $70,000
OC. $35,000
d. $700,000
Expert Solution
Step 1
Given,
Face Value = $1,000,000
years = 10
Coupon Rate =7%
Semi annual bond
Step 2
Amount of payments = Face Value * Coupon Rate /2
Amount of payments =$1,000,000*7%/2
Amount of payments = $ 1,000,000*3.5%
Amount of payments = $35,000
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