Question

Scooter wishes to sell a bond that has a face value of $919. The bond bears an interest rate of 6.01% with bond interest payable quarterly. Three years ago, $1,221 was paid for the bond. At least a 12.68% return (yield) on the investment is desired. The quarterly bond interest payment that Scooter received is:

Answer 1

Scooter

The quarterly bond interest payment that Scooter received is:

= $13.81.

Step-by-step explanation:

a) Data and Calculations:

Face value of bond bought = $919

Price of the bond three years ago = $1,221

Premium paid on the bond = $302 ($1,221 - $919)

Annual coupon interest rate = 6.01%

Annual return (yield) rate = 12.68%

Interest receivable = quarterly or four times per year

Quarterly bond interest = $13.81 ($919 * 6.01% * 1/4)