If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $1,375,then what is the semiannual interest on the bond?
A)$55
B)$80
C)$100
D)$110
E)$137

Question

Quizplus · Accepted Answer

The semiannual interest on the bond can be calculated by first determining the annual interest rate that the bond is effectively paying, given its market value. If comparable bonds are paying 8 percent annually, this means the bond in question would also aim to yield a similar return. However, because the bond's market value is $1,375 instead of its face value of $1,000, the actual yield is higher. The annual interest in dollars would be 8% of $1,000, which is $80. Since interest payments on bonds are typically made semiannually, we divide this amount by 2 to get the semiannual interest payment, which is $40. However, the information provided and the calculation do not align with the options given, indicating a misunderstanding in the calculation based on the provided options. The correct approach to find the semiannual interest based on the options given would involve understanding the bond's coupon rate or yield based on its market value, but with the information provided and typical calculations, none of the options directly align with the standard calculation of semiannual interest from an 8% annual yield on a $1,000 bond. Given the options and the typical approach to calculating semiannual interest, there seems to be a discrepancy in the explanation or a misunderstanding in the calculation process based on the provided options.

If Comparable Bonds Are Paying 8 Percent and the Approximate