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    Total interest expense on bonds issued at a premium

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    Case Corp. issued $200,000, 5%, 3-year bonds at 104, with interest payable semi-annually. The total interest expense (the total cost of borrowing) over the life of the bond is:

    A) $26,000
    B) $18,000
    C) $22,000
    D) $38,000
    E) $30,000

    The answer is "C" but want to know how to get there

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    Solution Preview

    The cash interest paid is 200,000 X 5% X 3 years = $30,000

    When the bonds are ...

    Solution Summary

    The solution explains how to calculate the total interest expense on bonds issued at a premium