Question

For the given corporate bond, whose annual simple interest rate is provided, find the semiannual simple interest

payment and the total interest earned over the life of the bond. Assume 365 days in a year.
$4800 Company A, 5-year bond, 2.413%
The semiannual interest on the corporate bond is $
(Round to the nearest cent as needed.)

Answer 1

• Semiannual interest: $57.91
• Total interest: $579.10

Explanation:

You want the amount of the semiannual interest payment on a $4800 bond that earns 2.413%, and the total of payments over 5 years.

Semiannual

The interest for a year is given by ...

I = Prt

I = $4800·0.02413 = $115.824

The semiannual interest payment will be half that amount, or ...

payment = $115.824/2 ≈ $57.91

The semiannual interest on the corporate bond is $57.91.

Total interest

The total amount of interest paid on the bond is 10 semiannual payments, or ...

total interest = 10 · $57.91 = $579.10

The bond will pay $579.10 over its 5-year life.

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Additional comment

If some accountant keeps track of the fractional cents, there will be two of the ten payments that will be $57.92 during the bond's life. That will bring the total of interest earned to $579.12. We don't expect that to be considered in this problem.

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