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What is the semi-annual interest payment on $100,000 of 12% bonds?
A$12,000
B$6,000
C$3,000
D$1,000
Answer & Solution
Correct answer: B. $6,000
1. Multiply face amount by the contract rate for the annual interest: \$100{,}000 \times 12\% = \$12{,}000.
2. Interest is paid semi-annually, so divide by 2: \$12{,}000 \div 2 = \$6{,}000.
3. The semi-annual payment is $6,000.
4. Option A is the full annual amount, not the half-year payment.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Bonds", p.222_
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