GOALS BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 1 7.5Bond Interest Calculate bond income Calculate bond yield Calculate total cost of bonds.

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Presentation transcript:

GOALS BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 1 7.5Bond Interest Calculate bond income Calculate bond yield Calculate total cost of bonds

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 2 Bond Interest Investors in bonds receive interest payments as income. Bond interest is often paid semiannually. The interest rate of a bond is based on the bond’s par value. Par Value × Rate × Time = Interest

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 3 Bond Income To find your bond income, find the interest you receive for one bond. Then multiply that result by the number of bonds you own.

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 4 Bond Yields One way to compare bond investments is to find the current yield of bonds. The current yield of a bond is found by dividing the bond’s annual interest income by the bond’s price. Current Yield = Annual Income ÷ Bond Price

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 5 Total Cost of Bonds When a bond is sold, whoever owns the bond on the next interest date receives the full amount of interest for the entire past interest period. When you buy a bond, you may have to pay the market price of the bond plus any interest that the bond has earned from the last interest date.

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 6 BUSINESS TIP Accrued interest is interest that has been earned but not yet paid.

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 7 To find the interest, multiply the par value by the interest rate. Then divide that by the number of times you get interest each year.

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 8 $175 $78.13

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 9

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 10 $767.2% $ %

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 11

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 12

BUSINESS MATH© Thomson/South-WesternLesson 7.5Slide 13