Question

Manuel purchased a corporate bond with a face value of $2,500 at a coupon rate of 4.18% that will mature in four years. If Manuel keeps the bond for four years, how much total interest will he receive?

Answer 1

Explanation:

To calculate the total interest that Manuel will receive, we need to use the formula:

Total interest = face value x coupon rate x time

Where:

- Face value is the amount of the bond, which is $2,500 in this case

- Coupon rate is the annual interest rate of the bond, which is 4.18%

- Time is the length of time that the bond will be held, which is 4 years

Substituting the given values into the formula, we get:

Total interest = $2,500 x 4.18% x 4 years

Total interest = $2,500 x 0.0418 x 4

Total interest = $417

Therefore, Manuel will receive a total of $417 in interest if he keeps the bond for four years.