Answer:
She will report an interest income of $1,827 for this year.
Explanation:
The yield to maturity is 6%. However, the interest on the bond is compounded semi-annually. Therefore, we need to calculate the interest income for either semi-annual period and then sum the two incomes. Â
Interest income for first semi-annual period
= $30,000 x 0.06 x 6/12
= $900
Interest income for second semi-annual period
= ($30,000 + $900) x 0.06 x 6/12
= $30,900 x 0.06 x 6/12
= $927
Interest income for the year
= $900 + $927
= $ 1,827
Answer:
The interest that would be reported this year is $1827
Explanation:
The interest on loan for the first six months is calculated thus:
$30000*6%*6months/12months=$900
Thereafter, the next six month interest would be based on the initial investment and the interest earned in the first six months since the interest is compounded interest.In other words, interest is paid on initial investment and also on the interest earned by the initial investment
($30000+$900)*6%*6months/12months=$927
The total interest earned the investment in the first year is $900+$927=$1827
