Abby Ring buys five bonds of Moe Co. 12 3/4 15 at 89.375 with a commission of $5.00 per bond. Her total annual interest is:

Question

Quizplus · Accepted Answer

To calculate Abby Ring's total annual interest, follow these steps:

1. Calculate the total cost of the bonds:
- Each bond costs $89.375, and Abby bought 5 bonds, so the total cost before commission is 5 x $89.375 = $446.875.

2. Add the commission:
- Abby paid a commission of $5.00 per bond, which comes to a total commission of 5 x $5.00 = $25.00.
- Add this to the total cost of the bonds: $446.875 + $25.00 = $471.875.

3. Calculate the annual interest:
- Each bond has a face value of $1,000 and an interest rate of 12 3/4%.
- To convert the mixed number to a fraction, multiply the whole number by the denominator and add the numerator: 12 x 4 + 3 = 51.
- Divide the interest rate by 4 to get the quarterly rate: 51/4 = 12.75%.
- Multiply the quarterly rate by the face value of each bond: 0.1275 x $1,000 = $127.50.
- Multiply this by the number of bonds Abby bought: $127.50 x 5 = $637.50.

Therefore, Abby Ring's total annual interest is $637.50, which is answer choice D.

Abby Ring Buys Five Bonds of Moe Co