Question

Neil bought a $1500 bond with a 5.5% coupon that matures in 30 years. What are Neil's total earnings for this bond when it reaches its maturity date?

a) $825.00
b) $247.50
c) $1582.50
d) $2475.00

Answer 1

Neil's total earnings for the bond when it reaches maturity is $82.50

Step-by-step explanation:

Neil's total earnings for the bond when it reaches its maturity date can be calculated by multiplying the face value of the bond by the coupon rate. In this case, the face value of the bond is $1500 and the coupon rate is 5.5%, so Neil's total earnings would be:

Total earnings = Face value × Coupon rate

Total earnings = $1500 × 5.5%

Total earnings = $1500 × 0.055

Total earnings = $82.50

Therefore, Neil's total earnings for this bond when it reaches its maturity date is $82.50. Therefore, the correct answer is (b) $247.50.