Question

required information the following information applies to the questions displayed below. hillside issues $3,000,000 of 6%, 15 - year bonds dated january 1, 2027, that pay interest semiannually on june 30 and december 31. the bonds are issued at a price of $2,592,334. complete this question by entering your answers in the tabs below. req 1 req 2a to 2c req 3 req 4 req 5 complete the below table to calculate the total bond interest expense to be recognized over the bonds’ life. total bond interest expense over life of bonds: amount repaid: 2700000 payments of $ 3,000,000 $ 8,100,000,000.000 par value at maturity 5,700,000 total repaid 8,100,005,700,000 less amount borrowed 2,592,334 total bond interest expense $ 8,100,003,107,666

Explanation:

Step1: Calculate semiannual interest payment

The annual coupon rate is 6%, so semiannual rate is $\frac{6\%}{2}=3\%$. Semiannual interest payment: $\$3,000,000 \times 3\% = \$90,000$

Step2: Find total interest payments

15-year bonds with semiannual payments mean $15 \times 2 = 30$ payments. Total interest paid: $\$90,000 \times 30 = \$2,700,000$

Step3: Calculate total repaid

Add total interest and par value: $\$2,700,000 + \$3,000,000 = \$5,700,000$

Step4: Compute total bond interest expense

Subtract amount borrowed from total repaid: $\$5,700,000 - \$2,592,334 = \$3,107,666$

Answer:

Total bond interest expense over life of bonds:
Par value at maturity		$\$3,000,000$
Total repaid		$\$5,700,000$
Less amount borrowed		$\$2,592,334$
Total bond interest expense		$\$3,107,666$