Final answer:
The semiannual interest payment for a $1,000 par value bond with a semiannual market interest rate of 7.00% is $35, assuming the coupon rate is equal to the market rate.
Step-by-step explanation:
The student is asking about the semiannual interest payment for a newly issued 20-year bond with a par value of $1,000 that was sold for $936.
The market requires a semiannual interest rate of 7.00%. To calculate the semiannual interest payment, we can use the coupon rate, which is not provided in the question but is hinted by the given market rate. Since the bond pays interest semiannually, we need to divide the annual market rate in half to get the semiannual market rate.
Therefore, if we assume that the coupon rate equals the market rate, as is common for newly issued bonds, we would have a semiannual interest rate of 3.5% (half of 7%).
To find the semiannual interest payment, we multiply the par value of the bond by the semiannual interest rate:
3.5% of $1,000 = 0.035 × $1,000 = $35.
The semiannual interest payment on the bond is $35.