Augi buys a bond for $10,000 and receives interest payments of $400 every six months. The interest rate on the bond is approximately

Question

Quizplus · Accepted Answer

To determine the interest rate on the bond, we need to divide the annual interest payments by the bond's face value.

The annual interest payment is $400 x 2 (since interest is paid every six months) = $800.

Dividing $800 by the face value of $10,000 gives us 0.08, or 8%. Therefore, the answer is choice B, 8 percent.

Augi Buys a Bond for $10,000 and Receives Interest Payments