Question

Compute the annual interest that would be earned on the following bond.

A ​$2000 Treasury bond with a current yield of

3.7% that is quoted at 115.1 points

Answer 1

$85.174

Explanation:

Data provided in the question;

Treasury bond = $2000

Interest rate = 3.7%

Quoted at 115.1 points or 1.151%

Therefore,

the price of the bond = 1.151 × $2000

or

the price of the bond = $2,302

Thus,

the annual interest = Price of the bond × rate

or

the price of the bond = $2,302 × 0.037 = $85.174

Hence, the annual interest in $85.174