Question

Randall bought a bond with a face value of $7,892 and a coupon rate of 8.62%. Thebond will mature in 13 years. How much interest will he receive semiannually?Round answer to the hundredths place. If the answer doesn't have a hundredthsplace then use zeros so that it does. Do not include the units

Answer 1

Step 1

Given;

`\begin{gathered} Face\text{ }value\text{ bond = \$7892 } \\ Rate\text{ of interest=8.62\%=0.0862} \\ Bond\text{ will mature in 13 years} \end{gathered}`

If the interest is semiannual, the rate of interest will reduce to half.

`\begin{gathered} So\text{ the new interest rate will be} \\ (8.62)/(2)=4.31 \\ \end{gathered}`

Step 2

Find how much interest will he receive semiannually?

`Simple\text{ interest=}(Principal* Rate* Time)/(100)`
`\begin{gathered} S.I=(7892*4.31*1)/(100) \\ S.I=\text{ \$}340.1452 \\ S.I\approx\text{ \$340.15} \end{gathered}`

Hence, the interest he will recieve semina