# On July 1, a company sells 8-year \$250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. \$120,000 B. \$60,000 C. \$7,500 D. \$15,000

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 13, Problem 6MC
Textbook Problem
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## On July 1, a company sells 8-year \$250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________.A. \$120,000B. \$60,000C. \$7,500D. \$15,000

To determine

Concept introduction:

Bonds:

are defined as debt instruments which are usually issued by the company that borrows to its lenders. They are issued at a rate of interest that is specified and for a specified period of time. The bondholders receive a fixed rate of interest on the bonds and the repayment of the bonds is made at the maturity date.

Simple interest:

Simple interest is the amount of interest paid on the principal amount using a fixed interest rate. The formula to calculate the Simple interest is as follows:

Simple Interest = Principal amount × Interest rate × Period

To choose:

The Annual interest payment on bonds.

### Explanation of Solution

The Annual interest payment on bonds is calculated as follows:

The Annual interest payment on bonds = Fa...

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