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

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

Answer 2

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
`(7.25)/(2)=3.625`

Formula for simple interest

`=\frac{\text{Principal}* Rate * time}{100}`

Interest after 6 months will be

`=(6000 * 3.625 * 1)/(100)\\\\=60 * 3.625\\\\=217.5`

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