sal bought a $1000 bond that has a coupon rate of 7%. the bond will mature in 10 years. how much interest…

sal bought a $1000 bond that has a coupon rate of 7%. the bond will mature in 10 years. how much interest will he receive semiannually? $35 $70 $140 $700

sal bought a $1000 bond that has a coupon rate of 7%. the bond will mature in 10 years. how much interest will he receive semiannually? $35 $70 $140 $700

Answer

Explanation:

Step1: Identify annual - interest formula

Annual interest = Face value×Coupon rate The face value of the bond is $1000 and the coupon rate is 7% or 0.07. So, the annual interest $I_{annual}=1000\times0.07 = 70$.

Step2: Calculate semi - annual interest

Since semi - annual means twice a year, semi - annual interest $I_{semi - annual}=\frac{I_{annual}}{2}$. $I_{semi - annual}=\frac{70}{2}=35$.

Answer:

A. $35