If a corporation issues a 10-year $100,000 8% bond. What is the total that the issuing corporation pays to the bondholder over the next 10 years?
Explanation
Answer: C - The issuing corporation will pay a total of $180,000 in principal and interest to the bondholder over the next 10 years.
Key Takeaway: Interest on a bond is payable semi-annually. To determine the semi-annual interest payment, use this formula: (face value x interest rate x 6/12)-in this case, $4,000.
With 20 interest payments to be made, the total interest paid will be $80,000 + the face value of the $100,000 bond, for a total of $180,000.
