at the beginning of his current tax year, eric bought a corporate bond with a maturity value of $33,000 from the secondary market for $26,700. the bond has a stated annual interest rate of 6 percent payable on june 30 and december 31, and it matures in five years on december 31. absent any special tax elections, how much interest income will eric report from the bond this year and in the year the bond matures?

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aamirmajeed5100 aamirmajeed5100 · Answer 1 · 2022-11-11T14:41:12+01:00

Interest income reported this year is $1,980 and $1,602 the year bond matures.

What is the maturity value?

The amount owed and due to be paid to the holder of a financial obligation as of the obligation's maturity date is its maturity value.

Maturity value this year in the given question =$33,000

Maturity value in the year when the bond will mature=$26,700

The annual Interest rate on bond=6%

Calculation

Interest income reported this year according to the information given in the question is

Interest income=(maturity value × interest rate/2) × 2

=$33,000× 6%/2) × 2

Interest income=$1,980

Interest income reported the years the bond matures

Interest income=(maturity value × interest rate/2) × 2

=$26,700× 6%/2) × 2

Interest income=$1,602

So, Interest income is $1,980 and $1,602 respectively.

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