You own eight (8) 7.25 percent coupon bonds with a total maturity value of $8,000. How much will you receive every six months as an interest payment?
A) $213.50
B) $290.00
C) $427.00
D) $540.00
E) $843.75

Question

Quizplus · Accepted Answer

Step 1: Find the total semi-annual interest payment 
Total semi-annual interest payment = coupon rate x maturity value 
Total semi-annual interest payment = 0.0725 x $8,000 
Total semi-annual interest payment = $580

Step 2: Divide the total semi-annual interest payment by the number of bonds 
Semi-annual interest payment per bond = $580 / 8 
Semi-annual interest payment per bond = $72.50

Therefore, the answer is B: $290.00 since you own eight bonds, and every bond will receive $72.50 per interest payment (semi-annually). Thus, the total interest payment you will receive every six months is $290.00.

You Own Eight (8) 7