National Storage issued $90 million of its 10% bonds on April 1, 2018, at 99 plus accrued interest. The bonds are dated January 1, 2018, and mature on December 31, 2035. Interest is payable semiannually on June 30 and December 31. What amount did National receive from the bond issuance?

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Business

Lexi Zimmerman

17 March, 06:44

National Storage issued $90 million of its 10% bonds on April 1, 2018, at 99 plus accrued interest. The bonds are dated January 1, 2018, and mature on December 31, 2035. Interest is payable semiannually on June 30 and December 31. What amount did National receive from the bond issuance?

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Amber Forbes · Answer 1

The total amount of cash received is $91,350,000

Explanation:

The amount of cash proceeds realized from the bond issuance is the 99% of face value of $90 million plus the coupon interest due from January 2018 (date of the bond) to April 1,2018 (the date of bond issuance), that is three months of coupon interest payment.

The bond proceeds is computed as below:

Discounted bond price 99%*$90,000,000 = $ 89,100,000

Three months of interest 10%*$90,000,000*3/12 = $2,250,000

Total amount received from bond issue $91,350,000