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Important Information about Cash interest

The Ness Company sells $5,000,000 of five-year, 10% bonds at the start of the year. The bonds have an effective yield of 9%. Present value factors are below:

10% 9%
PV factor 1 year 0.90909 0.91743
PV factor 2 years 0.82645 0.84168
PV factor 3 years 0.75131 0.77218
PV factor 4 years 0.68301 0.70843
PV factor 5 years 0.62092 0.64993

The amount of cash interest paid in Year 1 on the bonds is

Solution Summary

The solution explains how to calculate the amount of cash interest

$2.19