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Reynolds Co. issued $16 million face amount of 6.00% bonds when market interest rates were 6.40% for bonds of similar risk and other characteristics. Required: a. How much interest will be paid annually on these bonds

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Answer: $960,000

Explanation:

The interest to be paid annually is the coupon rate of the bonds as a percentage of the bond's face value.

The coupon rate here is 6%

Face value is $16 million.

Annual interest is therefore:

= 16,000,000 * 6%

= $960,000

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