# On April 1 a company sells a 5-year, \$60,000 bond with a 7% stated interest rate. The market interest on that day was also 7%. If interest is paid quarterly, the company makes interest payments of ________. A. \$1,050 B. \$3,150 C. \$4,200 D. \$5,250

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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 9MC
Textbook Problem
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## On April 1 a company sells a 5-year, \$60,000 bond with a 7% stated interest rate. The market interest on that day was also 7%. If interest is paid quarterly, the company makes interest payments of ________.A. \$1,050B. \$3,150C. \$4,200D. \$5,250

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 amount of Quarterly Interest payment.

### Explanation of Solution

The amount of Quarterly Interest payment is calculated as follows:

Interest = Principa...

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