Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The amount paid to the bondholders for each semiannual interest payment is. Multiple Choice $30,000. $60,000. $33,750. $375,000. $67,500.
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The amount paid to the bondholders for each semiannual interest payment is. Multiple Choice $30,000. $60,000. $33,750. $375,000. $67,500.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 5
![### Bond Interest Payment Calculation
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The amount paid to the bondholders for each semiannual interest payment is:
#### Multiple Choice
- \( \circ \) $30,000
- \( \circ \) $60,000
- \( \bullet \) $33,750
- \( \circ \) $375,000
- \( \circ \) $67,500
**Explanation:**
To calculate the semiannual interest payment, use the formula for Interest Payment:
\[ \text{Interest Payment} = \text{Par Value} \times \text{Interest Rate} \times \frac{1}{2} \]
1. Par Value = $750,000
2. Annual Interest Rate = 9% = 0.09
3. Since the payments are semiannual, we divide the annual interest rate by 2.
\[ \text{Semiannual Interest Payment} = 750,000 \times 0.09 \times \frac{1}{2} = 33,750 \]
Thus, the semiannual interest payment to the bondholders is $33,750.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F950ccb0b-88f0-424e-a789-46ed3bd2a086%2F276c37d2-f264-422a-b8fb-1d2ce1003dce%2Feybaf8k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Bond Interest Payment Calculation
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The amount paid to the bondholders for each semiannual interest payment is:
#### Multiple Choice
- \( \circ \) $30,000
- \( \circ \) $60,000
- \( \bullet \) $33,750
- \( \circ \) $375,000
- \( \circ \) $67,500
**Explanation:**
To calculate the semiannual interest payment, use the formula for Interest Payment:
\[ \text{Interest Payment} = \text{Par Value} \times \text{Interest Rate} \times \frac{1}{2} \]
1. Par Value = $750,000
2. Annual Interest Rate = 9% = 0.09
3. Since the payments are semiannual, we divide the annual interest rate by 2.
\[ \text{Semiannual Interest Payment} = 750,000 \times 0.09 \times \frac{1}{2} = 33,750 \]
Thus, the semiannual interest payment to the bondholders is $33,750.
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