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Adonis Corporation issued 10-year, 7% bonds with a par value of $250,000. Interest is paid semiannually. The market rate on the issue date was 6%. Adonis received $268,603 in cash proceeds. Which of the following statements is true?
Adonis Corporation issued 10-year, 7% bonds with a par value of $250,000. Interest is paid semiannually. The market rate on the issue date was 6%. Adonis received $268,603 in cash proceeds. Which of the following statements is true?a. Adonis must pay $250,000 at maturity plus 20 interest payments of $7,500 each.
b. Adonis must pay $250,000 at maturity plus 20 interest payments of $8,750 each.
c. Adonis must pay $250,000 at maturity and no interest payments.
d. Adonis must pay $268,603 at maturity plus 20 interest payments of $8,750 each.
e. Adonis must pay $268,603 at maturity and no interest payments.
Adonis Corporation issued 10-year, 7%bondswith a par value of $250,000.Adonis must pay $250,000 at maturity plus 20 interest payments of $8,750 each.Adonis Corporation issued 10-year, 7% bonds with a par value of $250,000. This means that the face value of the bonds is $250,000, and theannual interest rateis 7%. Interest is paid semiannually, so there will be 2 interest payments per year for 10 years, totaling 20interest payments.The market rate on the issue date was 6%, but the bond's interest rate is 7%. Since the bond's interest rate is higher than themarket rate,investors are willing to pay a premium for the bond. This is why Adonis received $268,603 in cash proceeds instead of thepar valueof $250,000. The interest payment for each period can be calculated as follows: Interest payment = Par value × Annual interest rate × (1/Number of payments per year) Interest payment = $250,000 × 7% × (1/2) = $8,750 At the end of the 10-year period, Adonis must pay back the bond's par value of $250,000, not the cash proceeds of $268,603.To Know more aboutBondVisit:brainly.com/question/30433452#SPJ11...