Annapolis Company purchased a $3,000, 4%, 9-year bond at 97 and held it to maturity. The...
Annapolis Company purchased a $3,000, 4%, 9-year bond at 97 and held it to maturity. The straight line method of amortization is used for both premiums & discounts. What is the net cash received over the life of the bond investment? (all money received minus all money paid, round to nearest whole dollar)
Homework Answers
Answer:
Interest received each year = Face value x Stated Rate = $3,000 x 4% = $120
Total Cash Interest received over the life of the bond investment = $120 x 9 years = $1,080
| Total Cash Interest received | $1,080 |
| Cash received at Maturity | $3,000 |
| Total Money received | $4,080 |
| (Less): Cash paid for Bond investment [$3,000 x 0.97] | ($2,910) |
| Net cash received over the life of the bond investment | $1,170 |
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