Adonis corporation issued 10-year, 8% bonds with a par value of $200,000. interest is paid semiannually. the market rate on the issue date was 7.5%. adonis received $206,948 in cash proceeds. which of the following statements is true? a. adidas must pay $200,000 at maturity and no interest payments. b. adidas must pay $206,948 at maturity and no interest payments. c. adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each. d. adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each. e. adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

Option (C) is correct.

Explanation:

Issue price of bond (Par value) = $200,000

Interest is paid semiannually,

Annual interest rate = 8%

Annual interest amount to be = Par value of bond × Annual interest rate

                                                 = $200,000 × 8%

                                                 = $16,000

Semiannual interest payment = Annual interest amount ÷ 2

                                                 = $16,000 ÷ 2

                                                 = $8,000

Therefore,

Repayment at maturity:

Face value of Bond = $200,000

Final Semiannual interest payment = $8,000

Hence, Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each.

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