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25 Auerbach Inc. issued 8% bonds on October 1, 2021. The bonds have a maturity date...

25 Auerbach Inc. issued 8% bonds on October 1, 2021. The bonds have a maturity date of September 30, 2031 and a face value of $325 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2022. The effective interest rate established by the market was 10%. How much cash interest does Auerbach pay on March 31, 2022? (Round your answer to 2 decimal places.) Multiple Choice $26.00 million. $13.00 million. $32.50 million. $16.25 million.

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Answer #1

Answer

--Cash interest paid = Face value x stated interest x Period
= $ 325 millions x 8% x 6months/12months
= $ 13 millions

--Correct Answer = Option #2: $ 13.00 millions

--No of months from 1Oct 2021 to 31 Mar 2022 = 6 months

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