Morley Company issued a $7 million face amount of 10% 10-year bonds on June 1, 2004. The bonds pay interest on an annual basis on May 31, each year.
1.
To calculate the amount of interest paid for each bond annually, you need to know the face amount of the bond and the coupon rate.
In this case, Morley Company issued $7 million face amount of 10% 10-year bonds on June 1, 2004.
The coupon rate of the bond is 10%, which means that the bond pays 10% of its face amount as interest every year.
To calculate the annual interest paid for each bond, you can use the following formula:
Annual interest = Face amount * Coupon rate
Plugging in the values, the annual interest paid for each bond would be:
Annual interest = $7,000,000 * 10% = $700,000.