Interest Expense – MCQ

Practice Question

Intro to Financial Accounting
Non-Current Liabilities
Interest Expense Calculations
MCQs

Calculate the interest expense for a bond with a face value of $1,000,000, a coupon rate of 6%, and interest paid semi-annually.

  1. $60,000
  2. $30,000
  3. $120,000
  4. $15,000
Answer +
Correct Answer: B
Explanation +

Interest Expense = Face Value × Coupon Rate × Time

= $1,000,000 × 6% × 1/2 = $30,000 per semi-annual period.

Since interest is paid twice a year, this is the interest amount for each payment. The total annual interest expense would be $60,000.