Question

Randall bought a bond with a face value of $6000 and a coupon rate of 7.25%. the bond will mature in 5 years. how much interest will he receive semiannually?

Answer 1

Answer:

Face value of bond = $ 6000

Rate of interest =7.25 %

The Bond will mature in 5 years.

If the interest is semiannually , the rate of interest will reduce to half.

So, new rate of interest will be $\frac{7.25}{2}=3.625$

Formula for simple interest

$=\frac{\text{Principal}\times Rate \times time}{100}$

   Interest after 6 months will be

   $=\frac{6000 \times 3.625 \times 1}{100}\\\\=60 \times 3.625\\\\=217.5$

So, interest that Randall will receive after six months = $ 217.50

Answer 2

I just took a test with this question it's $217.50