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8 October, 17:48

On March 2, 2019, 20-year, 6 percent, general obligation serial bonds were issued at the face amount of $3,000,000. Interest of 6 percent per annum is due semiannually on March 1 and September 1. The first payment of $150,000 for redemption of principal is due on March 1, 2020. Fiscal year-end occurs on December 31. What is the interest expenditure for the fiscal year ending December 31, 2019

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  1. 8 October, 21:41
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    The answer is $90,000

    Explanation:

    Interest rate is 6percent

    Principal is $3,000,000

    Annual repayment:

    6percent of $3,000,000

    = $180,000

    Therefore, semi annual (2 times a year) will be:

    $180,000 : 2

    $90,000

    The bond was issued on March 2, 2019. And the payment is semiannual (meaning the interest will be paid two times a year). And the payment date for interest are March 1 and September 1 of every year till it expires.

    The payment for March 1 2019 is not possible because the bond was issued March 2, 2019 and the interest payment has not started. Therefore, the next repayment of $90,000 is September 1. And this will be the interest expenditure for the fiscal year ending December 31, 2019
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