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Brown Co. issued $100 million of its 11% bonds on April 1, 2021 at 90 ($90 million) plus accrued interest. The bonds are dated January 1, 2021 and have an effective interest rate of 12%. Interest is payable semi-annually on June 30 and December 31. What amount did Brown receive from the bond issuance?
A) $87.8 million
B) $99.0 million
C) $100.0 million
D) $101.5 million

Respuesta :

jepessoa

Answer:

$93,000,000

Explanation:

On the issue date, Brown Co. will receive cash equal to:

  • the face value of the bond times 90% = $100,000,000 x 90% = $90,000,000
  • plus accrued interest on the bonds = $100,000,000 x 12% x 3/12 = $3,000,000

total cash received on April 1, 2021 = $90,000,000 + $3,000,000 = $93,000,000

Answer:

93,000,000

Explanation:

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