Suppose an Investor Purchases $100,000 of 5% Government of Canada

Multiple Choice

Suppose an investor purchases $100,000 of 5% Government of Canada bonds at a price of $95,735 on June 1, 2020. The bonds pay interest on June 1 and December 1. The investor intends to hold the bonds until their maturity on June 2, 2025. The bonds will be outstanding for five years (10 interest periods) . The investor paid a discounted price for the bonds of $95,735 (an effective interest rate of 6%) . How much total interest revenue will be recorded on December 1, 2020?

A) $2,500
B) $2,917
C) $2,872
D) $3,354