Answered

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On January 1, Forward Company issues bonds that have a $25,000 par value, mature in 5 years, and pay 10% interest per year. Interest payments are paid to bondholders semiannually on June 30 and December 31. How much interest does Forward Company pay to bondholders every six months if the bonds are sold at par

Sagot :

$2,500 interest is paid to the bondholders by the company.

What are bonds?

  • A bond is a sort of security used in finance where the issuer owes the holder debt and is required, depending on the terms, to repay the principal and interest on the bond at the maturity date.
  • Interest is often paid at regular intervals.

What are interests?

  • According to economics, interest is the income obtained from lending a certain amount of money.
  • The amount earned is sometimes expressed as a percentage of the amount lent; this proportion is referred to as the interest rate.

Solution -

To find interest company pays to bondholders:

At par, bonds are sold. Interest is paid every half a year (2 times a year) Interest equals Par Value/10.

25,000/10 = 2,500

Therefore, $2,500 interest is paid to the bondholders by the company.

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