Perry Bank has $450,000 of 9% debenture bonds outstanding. The bonds were issued at 105 in 2018

Question:

Perry Bank has $450,000 of 9% debenture bonds outstanding. The bonds were issued at 105 in 2018 and mature in 2038. The bonds have annual interest payments.

Requirements
1. How much cash did Perry Bank receive when it issued these bonds?

2. How much cash in total will Perry Bank pay the bondholders through the maturity date of the bonds?

3. Calculate the difference between your answers to requirements 1 and 2. This difference represents Perry Bank’s total interest expense over the life of the bonds.

4. Compute Perry Bank’s annual interest expense using the straight-line amortization method.

Multiply this amount by 20. Your 20-year total should be the same as your answer to requirement 3.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...

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