How Much Interest Will Accrue on a $40,000 Face Value

question 55

Multiple Choice

How much interest will accrue on a $40,000 face value, 60-day note that bears interest at 9 percent a year?

• A) $3,600
• B) $1,800
• C) $900
• D) $600 40000 x 60/360 x .09 = 600.

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Definitions:

Call Premium

The amount above the par value a bondholder receives if the issuer redeems a bond before its maturity date.

Semiannually

A term describing an action or event that occurs twice a year.

Semiannual Coupon

A bond or fixed-income security payment made to its holder twice a year as interest for the investment.

Coupon Rate

The interest rate stated on a bond or other fixed-income security that the issuer promises to pay the holder until maturity.