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A customer buys 5M of 6 1/4% Treasury Bonds at 100. How much interest income will the customer receive at each interest payment?

A. $31.25
B. $62.50
C. $156.25
D. $312.50

Answer :

Final answer:

To calculate the interest income for a $5,000,000 Treasury bond with an interest rate of 6 1/4%, you would multiply the bond amount by the interest rate. This results in an interest income of $312,500 per payment, thus option D is correct

Explanation:

The interest rate of a Treasury Bond determines how much the bond holder will receive in interest payments. The question states the bond is at a rate of 6 1/4% (which is 0.0625 in decimal), and the customer buys 5M or $5,000,000 worth of these bonds.

To calculate the interest income the customer will receive at each payment, we need to multiply the amount of the bonds by the interest rate. This would be: $5,000,000 * 0.0625 = $312,500.

Therefore, the customer will receive $312,500 at each interest payment, which corresponds to option D.

Learn more about Interest Income Calculation here:

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