Final answer:
To calculate the semiannual interest on a bond, divide the annual interest by two. For a $1,000 bond at 8% annual interest, the annual interest would be $80, making the semiannual interest $40, which is not listed among the given choices.
"The correct option is approximately option B"
Step-by-step explanation:
The question seeks to determine the semiannual interest on a $1,000 bond that is currently valued at $1,375 when comparable bonds are paying an annual rate of 8 percent. To find the annual interest payment, we apply the nominal annual interest rate to the face value of the bond:
Annual interest = Face value × Annual interest rate = $1,000 × 0.08 = $80
Since interest on a bond like this is typically paid semiannually, the semiannual interest payment is half of the annual interest payment:
Semiannual interest = Annual interest ÷ 2 = $80 ÷ 2 = $40
However, the options given do not include $40, which indicates a possible mistake in interpreting the question or the choices. Double-checking the bond terms for payment frequency or reviewing the context for any additional information could be necessary to resolve this discrepancy. As per the given options and assuming semiannual payment, the closest match would be
$80
(Option B), though it is the annual, not the semiannual interest payment.
In summary, the semiannual interest on a $1,000 bond with an 8% annual interest rate is actually $40, but $80 is the annual interest, not semiannual, which suggests that there may be a misunderstanding or a typo in the question or provided choices.