Suppose an Investor Purchases $100,000 of 5% Government of Canada

Multiple Choice

Suppose an investor purchases $100,000 of 5% Government of Canada bonds at a price of $95,735 on June 1, 2020. The bonds pay interest on June 1 and December 1. The investor intends to hold the bonds until their maturity on June 2, 2025. The bonds will be outstanding for five years (10 interest periods) . The investor paid a discounted price for the bonds of $95,735 (an effective interest rate of 6%) . What amount will be reported for the long-term investment in bonds on the balance sheet on December 31, 2020?

A) $100,000
B) $96,172
C) $95,735
D) $96,108