Question

Gabriel buys a $2,000 fixed-rate bond with a 4% coupon and five years to maturity. How much interest will he earn over the life of the bond? Select the best answer from the choices provided.

Answer 1

The coupon rate of the bond is 4%
coupon=4/100×2000
coupon=$80
Time taken to maturity for the bond is 5 years
number of terms=2 terms
thus total amount of interest will be:
2×5×80
=$800