On July 1 2018 Bramble Corp issued 3800 of its 9 1000 bonds

On July 1, 2018, Bramble Corp. issued 3800 of its 9%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2018 and mature on April 1, 2028. Interest is payable semiannually on April 1 and October 1. What amount did Bramble receive from the bond issuance?

Solution

Answer: c. $ 3,847,500

Solution:

Amount received from the bond issuance

= (Value of bonds X Given 99%) + (Value of bonds X Accrued interest X Time period*)

= (3800 X $ 1,000 X 0.99) + (3800 X $ 1,000 X 9/100 X 3/12)

= $ 3,762,000 + $ 85,500

=$ 3,847,500

* Time period will be 3 months that is from 1 July 2018 to 1October 2018.