Annual versus semiannual interest for bonds issued at face value
Nash Co. issued bonds with a face value of $120,000 on January 1, 2012. The bonds had a 6 percent stated rate of interest and a five-year term. The bonds were issued at face value.
Required
a.What total amount of interest will Nash pay in 2012 if bond interest is paid annually each December 31?
b. What total amount of interest will Nash pay in 2012 if bond interest is paid semiannually each June 30 and December 31?
c. Write a memo explaining which option Nash would prefer.
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