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PowerTap Utilities is planning to issue bonds with a face value of $2,000,000 and a coupon rate of 10 percent. The bonds mature in 8 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. PowerTap uses the effective-interest amortization method. Assume an annual market rate of interest of 12 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) P10-6 Part 3 3. What amount of cash should be paid to investors June 30 and December 31 of this year

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anthougo

The amount of cash that PowerTap Utilities should pay to investors on June 30, Year 1, and December 31, Year 1 is $80,000, respectively.

Data and Calculations:

PowerTap's Bonds' Face Value = $2,000,000

Coupon Interest rate = 10%

Maturity period = 8 years

Interest payment = semiannually

Interest payment dates = June 30 and December 31

Assumed market interest rate = 12%

Interest paid to investors semiannually = $80,000 ($2,000,000 x 8% x 1/2)

Thus, on June 30 and December 31, PowerTap Utilities will pay investors $80,000, making it a total of $160,000 for the year.

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