Calculate the annual interest that you will receive on the described bond. A​ $1000 Treasury bond with a current yield of 4.2​% that is quoted at 106 points

The annual interest is $____ ​(Round to the nearest cent as​ needed.)

To calculate the annual interest on a bond, we can use the following relationship:

\[
\text{Current Yield} = \frac{\text{Annual Interest Payment}}{\text{Price of the Bond}}
\]

We are given:
- Current yield = 4.2%
- Bond price = 106 points (which means 106% of its face value)
- Face value = $1000

### Step 1: Calculate the bond price
\[
\text{Bond Price} = 106\% \times 1000 = 1.06 \times 1000 = 1060
\]

### Step 2: Use the current yield formula to find the annual interest
Rearranging the current yield formula to find the annual interest:

\[
\text{Annual Interest Payment} = \text{Current Yield} \times \text{Price of the Bond}
\]

Substitute the given values:

\[
\text{Annual Interest Payment} = 0.042 \times 1060 = 44.52
\]

So, the annual interest is **$44.52**.

### Conclusion:
The annual interest is **$44.52** (rounded to the nearest cent).

Would you like to go over more details, or have any further questions?

Here are 5 related questions you may explore:
1. How do changes in bond price affect its yield?
2. What is the difference between current yield and yield to maturity?
3. How does the coupon rate of a bond differ from the current yield?
4. What factors influence the price of Treasury bonds in the market?
5. How do inflation expectations affect Treasury bond yields?

**Tip:** Current yield measures the income as a percentage of the bond's current price, not its face value.

Calculate the annual interest that you will receive on the described bond. A $1000 Treasury bond with a current yield of 4.2% that is quoted at 106 points. The annual interest is $____ (Round to the nearest cent as needed.)

Learn how to calculate the annual interest on a $1000 Treasury bond with a 4.2% current yield and a quoted price of 106 points. This problem covers essential financial concepts such as bond yields and percentage calculations, with a detailed step-by-step solution. Suitable for advanced high school students and college learners.

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